M&S making ‘painful decisions’ as sales slide
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