IRUK 500

M&S closes stores and targets online growth in a digital-first future

Marks & Spencer today set its sights on moving a third of clothing and home sales online for a digital-first future, as it reported growing sales and profits. It now plans to reduce store space through closures and space reductions.

The udpate came as it reported group revenue of £5.1bn in the six months to September 30, up by 2.6% on the same time last year. And while profits before tax and adjusted items of £219.1m came in 5.3% behind the same time last year, after adjustments related to moving out of international markets, bottom line pre-tax profits of £118.3m were 371.3% up on the same time last year. Online sales via M&S.com grew by 5.7% in the first half of the year.

Chief executive Steve Rowe said there had been encouraging progress in tackling “immediate and burning issues”, with improvements in clothing and home sales in particular, where full-price sales were up by 5.3%. A restructuring of international sales meant it now had a profitable and robust business.

“The business still has many structural issues to tackle as we embark on the next five years of our transformation, in the context of a very challenging retail and consumer environment,” he said. “Today we are accelerating our plans to build a business with sustainable profitable growth, making M&S special again.”

Here’s what the retailer said about its multichannel strategy.

Transformation planning

M&S, an Elite retailer in IRUK Top500 research, is already 18 months into a transformation plan. Key steps have included moving from reducing prices while stepping back from discounting, and investing in in-store service by adding more than 3,000 staff while cutting 500 head office jobs. Now, it says, it’s well placed to “face long term structural change in our marketplace”.

In today’s statement it said: “We start with great brand recognition, over 32m customers and quality, value and innovation rooted in our DNA. However, increased global and digital competition, pressure on consumers’ disposable income and increased cost inflation means unless we continue to adapt our business model, our competitive position will continue to erode. In this next phase of our programme we need to address structural challenges and continue to restore the basics at M&S, in order to deliver growth in later years.”

Moving forward

Now M&S plans to become a digital-first organisation and the UK’s “essential clothing retailer,” building on strengths in lingerie, schoolwear, denim and suits to sharpen its ranges and provide “better choices with fewer options” and “contemporary wearable style”. It aims to make a third of its clothing and home sales online while rationalising in-store space by closing stores, reducing space and making relocations, and slowing its Simply Food store opening plan. Digital-first approaches will also be taken into its stores. During the first half, it closed four clothing and home stores, and saw “encouraging early results” as sales moved to nearby M&S stores.

The next phase of transformation will see continued supply chain modernisation and investment in digital fulfilment. This, said M&S, will “enable more rapid growth online and help us match increasingly fast competitor fulfilment rates.”

In food, it says, it has lost out to competitors as they focus on convenience, and grow their online home delivery sales. “Hard pressed consumers,” it said, “are more aware of value and are careful about premium choices. Therefore, although our investment returns remain high, we are slowing our Simply Food opening programme as we reposition our food offer for future growth. Only the highest returning sites will qualify for addition to our store portfolio.”

It also aims to develop its international business through franchising.

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