We’ve won over Waitrose shoppers, says M&S chief

Bumper Christmas sales show retailer is mounting a successful turnaround after decade of false starts

MARKS & Spencer has said it is winning shoppers from Waitrose as its chief executive declared a record number of customers bought groceries with the retailer over Christmas.

Stuart Machin said the FTSE 100 retailer was taking market share from rivals and intended to make further gains this year by investing in prices.

His challenge comes as the battle between M&S and Waitrose sits on a knife edge, with the latest industry data giving both a 3.8pc share of the grocery market in the 12 weeks to Dec 30.

Asked on yesterday whether he expected M&S to overtake Waitrose soon, Mr Machin said: “I know every retailer talks about the gains and the losses, but we have taken share from some of the competition – and you named one [Waitrose]. I think it’s fair to say we think we can gain share from the broader food market overall. We’re not focused on just one competitor.”

On grocery price competition, Mr Machin said M&S was investing £50m this financial year, including £22m in the last three months of 2023, and “intends to invest more in value”.

He said the grocer’s “commitment is to not put prices up” but refused to rule out any future price increases.

“But our job is to keep restructuring our cost base, so it doesn’t impact the customer. That’s what we’re focused on,” Mr Machin added.

He was speaking as M&S revealed a record number of customers bought groceries from the chain’s food business over Christmas, with many going there for “more of their full shop” than previously. In clothing, the brand’s resurgence in womenswear also continued to reap dividends with knitwear, denim and premium Autograph items all flying off the shelves.

The comeback is a coup for M&S, which is finally mounting a successful turnaround after a decade of false starts. Mr Machin said the retailer was now entering 2024 “with a spring in our step”. Overall, M&S said sales rose 7pc to £3.9bn in the 13 weeks to the end of December. Like-for-like food sales were up 10pc, with meats, poultry, produce and bakery items selling strongly, while like-for-like sales in clothing and home rose by almost 5pc.

It comes hot on the heels of strong first-half results from M&S in November, when the retailer raised its full-year profit prediction from £575m to £640m.

Richard Lim, chief executive at Retail Economics, said: “These are fantastic results delivered in a challenging market. Shoppers have fallen back in love with M&S, buying into the re-energised proposition that’s centred around a leading omnichannel service.

“It’s been a mightily impressive turnaround and there’s lots of momentum in the business heading into 2024. While the outlook remains challenging, they are well positioned to navigate through these choppy waters.”

Shares in M&S fell as much as 6pc on yesterday after it cautioned over cost pressures from wage inflation, business rates and geopolitical risks such as disruption to shipping routes in the Red Sea. It later pared some of these losses to close the day just under 2.8pc lower.

Meanwhile, international sales disappointed investors to fall by 6.8pc to £288m during the period.

M&S’S share price has more than doubled over the past year helping to propel it back into Britain’s blue-chip index, four years after it was relegated from the FTSE 100. The retailer’s resurgence has been credited to a costly investment programme led by Mr Machin and masterminded by the chairman, Archie Norman, that has improved the quality of the retailer’s products, physical stores and online presence.

In yesterday’s announcement, the company said its so-called renewal stores – those that have been refurbished – had performed “particularly well” over Christmas.

They are designed to “offer the efficiency of a supermarket and the soul of a fresh food market”, with market-style displays that carry more fresh fruit and vegetables and bakery products as well as “fill your own” sections, wine tasting and ceramic pizza ovens.

Merry Yuletide – or should that be bah humbug? Marks & Spencer has unwrapped quite the festive treat. Forecast-beating profits, a long-overdue comeback for womenswear, bumper staff payouts and even record sales of Christmas creams, whatever those are.

Marks & Spencer is this year’s undisputed Christmas cracker, capping an impressive resurgence in 2023 in which its share price more than doubled. All that was missing was for boss Stuart Machin to deliver a set of truly stonking numbers dressed as an elf on a reindeer, accompanied by a little rendition of “Feliz Navidad”. There’s always next year.

So how did investors respond to this veritable Santa’s sack of cheer? With a pretty fierce sell-off that wiped 7pc off the share price in the space of just a couple of short hours. Talk about the Christmas Grinch. Even the prospect of a profit upgrade later in the year from a string of City brokers including Morgan Stanley, Shore Capital and Deutsche Bank wasn’t enough to satisfy the City.

Yet shareholders chose to focus on the few negatives as Machin cautioned about the rising cost of business rates and higher wages, plus “slight delays” from ongoing disruption in the Red Sea to container ships laden with goods from suppliers in Asia. M&S shares have had a strong run too, trading at a more than five-year high of 290p at the start of the week, so perhaps a reality check was inevitable at some point. This is M&S, after all – a world-beater when it comes to false dawns. Investors are looking in the wrong places.

If there is anything to really fear it is the prospect of a management team, high on the success of an undeniable comeback, getting carried away and doing something silly. That is what should be keeping fick

le fund managers awake at night as it notches up an 11th successive quarter of growth and prepares to unveil £663m in full-year profits – a 37pc leap on last year.

An interview that chairman Archie Norman gave over the festive period contained the makings of one or two alarm bells as the man feted as the architect of M&S’S unexpected turnaround raised the prospect of a return to international expansion.

Norman’s assertion that for M&S to be here for another 100 years it ultimately has “to become a global brand” is one that will raise eyebrows, and may even be the cause of some sleepless nights.

British retailers have a rotten track record when it comes to foreign forays. Other than JD Sports and Primark, it is difficult to think of many others that can claim to have done so with any real success in recent times. The list of those that have made a terrible fist of empire-building, however, is a long one, and it includes some venerable names – M&S among them.

Those of a certain age may remember its bungled takeover of the upmarket American men’s clothing chain Brooks Brothers. Bought for £160m in the late 1980s, M&S offloaded a dozen years later for less than a third of that, having racked up millions of pounds in losses.

“It was not a good fit with M&S’S core business or strategic priorities,” David Norgrove, M&S international director at the time admitted.

Norman – not unfairly – may argue that more than 20 years have passed since its unceremonious exit from America. But if that is a distant memory at M&S headquarters, its attempts at winning over fussy French shoppers with cheese and onion crisps and chicken tikka masala will still be fresh in the minds of many people – including its chairman.

The chain’s decision to pull out of France in 2016 came just one year before Norman was parachuted in and is remembered as a particular low point in M&S’S failed overseas ambitions as it flip-flopped over whether it wanted to be in the country.

Having left in 2001 to street protests over the thousands of French jobs that were lost as a result, M&S returned a decade later, only to depart again after just five years as the losses mounted up. Its three-storey flagship store on the Champs-elysées was left standing as a monument to the boardroom hubris that caused a storied British institution to so badly lose its way.

Having been left clearing up much of the mess, it is a surprise to learn that Norman is flirting with the idea of fresh conquests. A pledge that there will be no return to the “flag planting” of old is reassuring but only up to a point. M&S is an overwhelmingly British brand and though there may be some big expat markets where it could compete, past forays have demonstrated that it is hard to resonate with overseas customers even for a retailer of its stature.

There’s a suggestion that M&S could imitate the way that Zara and H&M adjust their ranges to suit demands according to different geographies, but it would be a bold undertaking to try to take on the pioneers of the fast fashion model that has upended the high street. However, with Norman seeking approval “to dream” there is a distinct risk that M&S sleepwalks into another costly misadventure that undoes all the hard-earned progress of the past few years.