Marks & Spencer today set out its plans to up the pace of change in its business as clothing and home sales move online, and more food deliveries are made direct to the home. The retailer says that “accelerated change is the only option” in the face of this channel shift, combed with growing competition from discounters in a challenging consumer market.
The retailer, ranked Elite in IRUK Top500 research, said in full-year results that changes in the high street and the move online “mean we have to be decisive with our store estate, renewing and closing stores more quickly” Its online capabilities, it said, were “behind the best of our competitors and our website is too slow.”
In addition, it said, its supply chain, in clothing, home and food, is in need of an upgrade, enabling it to cut stock levels, improve availability and waste, while being faster to market, and its fulfilment centre at Castle Donington has “struggled to cope with peak demand”.
The M&S strategy now is to reduce its costs by at least £350m as it becomes more efficient and cuts out waste, while it is speeding up its plans to close stores. Yesterday it said that it would close 100 stores as it speeds up the transformation of its store estate. It is looking to remove 25% of its in-store clothing and hoe space, while investing in its website and fulfilment facilities to boost online clothing and home sales. It is targeting 33% of sales in this category via its website. That investment includes a new retail distribution centre at Welham Green.
M&S is also looking to reclaim its ‘special’ position in UK family life, focusing on “strength in key shopping missions with new lines which have a broad appeal to family age customers and everyday occasions.”
The update came as group revenue reached £10.7bn in the year to March 31 2018. That’s 0.7% up on the same time last year. Pre-tax profits of £66.8m were down by 62.1%, after one-off costs of £514.1m related chiefly (£321.2m) to its store closure programme. Before those costs, top-line pre-tax profits were down by 5.4% on last time. Online sales via M&S.com grew by 5.2%.
Steve Rowe, M&S chief executive, said: “At our half-year results in November I outlined the need for accelerated change at M&S. The first phase of our transformation plan, restoring the basics, is now well underway and the actions taken have increased the velocity of change running through our business. These changes come with sort term costs which are reflected in today’s results.
“There are a number of structural issues to address and we are taking steps towards fixing these. The new organisation will largely be in place by July and the team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business. This is vital as we start to leverage the strength of the M&S brand and values across a family of businesses to deliver sustainable profitable growth in three to five years.”
Image courtesy of M&S