“We are judging progress as much by the pace of change as the trading outcomes.” So says M&S boss Steve Rowe, as the retailer reports a 3.1% decline in revenues for the half year, defending the company’s position of being in a state of flux as it adapts to changing trading conditions.
Figures out this week for the retailer’s half year performance a 3.1% fall in revenues on pre-tax profits of £223.5million – 2% up on last year – but like for like sales are down 1.1%. The company lodged exceptional costs of £96.8million, £47.6million of which is for its UK store closure programme
However, the company has £350million of targeted cost savings lined up as it completes its most radical restructuring in more than a decade.
As part of this, the company has appointed Jeremy Pee as chief digital and data officer to turn around M&S’s data and loyalty programmes and to drive the digital conversion of the business.
The retailer has also sent 1000 of its staff on a one day ‘digital immersion programme’ and, to tap into the best digital innovation, it has followed John Lewis Partnership’s lead and established incubation partnerships with Founders Factory and True Capital to, in Rowe’s words, “partly provide insight into the sector and partly to expose M&S colleagues to the speed and agility of entrepreneurial management”.
Much of this work is going to focus on upping the M&S website and mobile game, says Rowe. “Our website and online fulfilment capability remain well behind the best of our competitors,” he says. “However, very early steps to improve our website have helped deliver UK clothing and home growth of 9.1% online, with clothing going ahead of the market and further improvement has been seen in recent weeks [across early October].”
Rowe continues: “Technology and supply chain resilience remains [sic] an issue, but despite this, 20.4% of UK C&H [Clothing & Home] sales are now online compared to 18.2% in H1 2017/18. IT development and the transition from legacy systems remains challenging. A further IT development write=off was taken in the first half as we continue to experience teething problems with new systems, notable warehouse management.”
Now that it has reduced its rent and lease-hold burdens, says Rowe, the retailer will be looking at how to improve its remaining High Street stores, however, this is not a priority.
“Our store formats need renewing to create modern, customer and service-friendly and digital environment for both main businesses,” he says. “However, any evolution in format will fall into the second stage transformation. At this stage, store expenditure remains tightly controlled with limited, low-cost investment to improve sight lines and basic customer services.”
M&S has earmarked 100 full-line stores for closure and has shuttered 29 as part of a plan to save £350million by 2020/21. This is well underway and it is still assessing what other stores it is likely to close.
“We will also further rationalise the number of holding centres for stock as we complete our single tier network,” says Rowe. “In addition, we will leverage technology to improve store operations from labour scheduling to stock management and replenishment to self-scan and checkout.”