Food sales dip gives transitional M&S something to chew on

Comment Martin Flanagan

As Marks & Spencer’s core clothing arm has struggled for quite some years now, its cachet-rich food offering has often come to the rescue.

So it will be disappointing for M&S chief executive Steve Rowe and his new chairman and business troubleshooter Archie Norman that the bright spot of recent years has lost some lustre. Food sales rose 4.4 per cent in the first trading half, but this was only due to a score of new stores opening.

Same-floorspace sales in the division actually fell 0.1 per cent. In addition, gross profit margins in food fell 1.3 per cent, hit by higher input costs from the continuing post-brexit vote weakness of sterling. This margin squeeze is likely to continue.

M&S’S only consolation was that the fall in like-for-like sales in its clothing and homewares business was milder than expected, and got better as the half-year went on. The sales decline was 0.7 per cent, but only 0.1 per cent in Q2 – much better than the 1.2 per cent same-floorspace revenue fall in Q1.

Cognisant of the consumer climate, Norman, the former boss at Asda when it launched the competitively priced George clothing range, is understood to have told Rowe and M&S’S senior managers that he believes the company needs to cut its clothing prices.

Norman also apparently believes that the company needs to lose its fixation in terms of its clothing fashion offering with the over-55s, and attract a younger demographic as well. How this will play against Rowe’s talking up of the classic “Mrs M&S” customer last year suggests ambivalence. Rowe’s predecessor Marc Bolland had an altogether more tractable chairman in Robert Swannell during the last attempt to turn M&S around.

But you don’t bring in a personality and presence like Norman, and expect him to just keep the board sweet and not cast an eye on the operational nitty-gritty.

I think the restructuring Rowe has been pushing through, including cost-cutting, store closures and scaling back its Simply Food store opening programme, will all speed up.

M&S wants to recover both clothing and food sales market share amid tough economic headwinds. And it may be prepared to sacrifice shortish-term earnings to do so.