M&S mak­ing ‘painful de­ci­sions’ as sales slide

The Daily Telegraph - Business - - Business - By Ash­ley Arm­strong

BOSSES at Marks & Spencer claimed they be­lieved they could trans­form the ail­ing re­tailer into a “prof­itable, grow­ing busi­ness” within the next five years, de­spite its sales slid­ing fur­ther in the six months to the end of Septem­ber.

The bell­wether chain said the enor­mity of the turn­around chal­lenge it faced and the tough re­tail cli­mate meant that sales were un­likely to im­prove over the next few quar­ters as it made “painful de­ci­sions”.

Steve Rowe, the chief ex­ec­u­tive, laid bare the chal­lenges ahead by claim­ing that M&S’s “em­bed­ded cul­ture is siloed, slow and hi­er­ar­chi­cal”. He also ad­mit­ted that the re­tailer’s much­ma­ligned cloth­ing busi­ness was con­tin­u­ing to let down cus­tomers with a lack of avail­abil­ity, par­tic­u­larly in smaller women’s sizes.

The busi­ness has re­cently re­cruited TV pre­sen­ter Holly Wil­loughby to pick her “must-have” items for the sea­son, but it sold out in sev­eral sizes within hours. “In cloth­ing our busi­ness has an age­ing cus­tomer base, a very wide range, a weak sup­ply chain and an age­ing store port­fo­lio,” Mr Rowe added.

How­ever, chair­man Archie Nor­man said there was a mis­con­cep­tion that M&S should be chas­ing older cus­tomers by not re­vamp­ing its fash­ion ranges. “Most of the older cus­tomers that I talk to are maybe 55, but they want to look 35.

“If we have in our mind that an older cus­tomer no longer wants to look stylish that’s not go­ing to get us any­where.”

Marks & Spencer’s to­tal sales fell 3.1pc to £4.96bn in the six months to Sept 29, re­flect­ing 29 planned shop clo­sures. Cloth­ing and home sales dropped by 2.7pc, with like-for-like sales inch­ing 1.1pc lower. Mr Rowe said that the re­tailer’s fash­ion ranges were still “too broad and too shal­low”.

Food sales – once the sweet spot for M&S – dropped by 0.2pc with like-for­like sales down 2.9pc. M&S said the fall was due to the tim­ing of Easter and phas­ing out a num­ber of pro­mo­tions, in­clud­ing its pop­u­lar “Dine in for £10” of­fer, as it moved to re­duce the price of 100 ev­ery­day prod­ucts, such as chick­ens and burg­ers.

Mean­while, pre-tax prof­its rose 7.1pc to £126.7m as a re­sult of its on­go­ing cost-sav­ing pro­gramme.

Mr Nor­man quipped that “if Steve Rowe was Don­ald Trump he would be declar­ing this as a per­sonal vic­tory”, com­par­ing the mixed half-year re­sults to the US midterm elec­tion. Mr Rowe said that the re­tailer was mea­sur­ing its suc­cess in terms of some of the be­hindthe-scenes work on im­prov­ing its lo­gis­tics, web­site and sup­ply chain.

“This phase is about re­build­ing the foun­da­tions of the fu­ture M&S and we are judg­ing progress as much by the pace of change as the trad­ing out­come”, he said. As part of its £350m cost­sav­ings tar­get M&S said in May that it would close 100 stores. Mr Rowe yes­ter­day hinted that there would be fur­ther shop clo­sures by say­ing that “at least” 100 shops would shut as he re­struc­tured M&S’s out­dated store es­tate to re­flect the im­pact of on­line shop­ping on the busi­ness. He wants 30pc of M&S sales to be on­line within the next five years, although 70pc of all on­line pur­chases are col­lected in stores.

De­spite fac­ing calls from an­a­lysts to scrap its hefty share­holder pay­out in favour of in­vest­ing rad­i­cally in the busi­ness, M&S con­firmed its in­terim div­i­dend would be main­tained.Mr Rowe also said the com­pany was no longer con­sid­er­ing split­ting up its food and cloth­ing busi­ness on Ra­dio 4’s To­day show.

Its shares closed down 1.6p at 300.9p.

Marks & Spencer said the enor­mity of the chal­lenge meant sales were un­likely to im­prove over the next few quar­ters

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