M&S profits rise as marketing push helps womenswear sales
M&S saw profits rise for the first time in four years as a marketing push aimed at communicating the more premium nature of its food and womenswear ranges caused people to look again at the brand and influenced how much they would pay.
By Sarah Vizard
Underlying profits for the 26 weeks to 27 September increased 2.3% to £268m boosted by a rise in food sales and margin improvements. Margins have become a key concern with M&S chief executive Marc Bolland pledging to increase them by 1% this year. They were actually up by 1.5% in the first half.
The general merchandise business, which includes clothing and home, posted its 13th consecutive quarter of declines, with like-for-like sales down 2.9% and clothing falling by 2.2%, a worsening performance compared to both the previous quarter and the same period a year ago. However, M&S estimates that “unseasonal conditions”, namely the warm weather in September, caused an adverse impact of around 1.3%.
Bolland has spent more than £2.3bn since he joined in 2010 to overhaul the retailer’s product range, stores, website and marketing.
The retailer unveiled a new marketing campaign under the strapline “Only M&S” in September, the first time it has aligned its food and GM advertising. That resulted in advertising costs for the half-year rising 19.4 per cent to £83m.
Speaking to Marketing Week at the time, M&S’s executive director of marketing and international Patrick Bousquet-Chavanne said the main aim of the new campaign was to get people to reappraise the M&S brand. It focused initially on the quality of its food and womenswear with a TV push, supported by print, digital, social media and in-store activity.
The campaign does appear to have helped boost sales, with the more premium and confident message having an influence on the price people will pay for M&S goods. The retailer said it has seen an improvement in growth of full price sales in its womenswear and increasingly positive feedback from customers as they notice its focus on better quality and style.
Womenswear sales were up 1.3 per cent in the first five months of M&S’s financial year, with sales growth improving until September, when unseasonably warm weather affected sales across the market with both Next and H&M reporting a slowdown.
Neil Saunders, managing director at Conlumino, says: “Given that womenswear is one of M&S’s most problematic categories this swing into positive territory is a sign that the years of decline may well have bottomed out and that M&S’s strategy of becoming more fashion focused is starting to pay dividends. That said, this is a gentle uplift and indicates that while many women are ‘looking again’ at M&S it still has some way to go to become a destination for many of those who previously deserted it.”
In stores, M&S this week (3 November) unveiled its new shop at Westfield that offers customers more in-store services, lower stock density and fewer sub-brands. Saunders says that the retailer is “heading in the right direction”, although it will face challenges in translating the format into its smaller locations.
However, online continues to be a problem with sales again falling by 6.3%, although this was a slight improvement on the 8% drop seen in the first quarter. M&S says it has made a number of updates to the website including improved navigation and display and a new guest checkout facility, an admission perhaps that the original site was too focused on content and not that easy to shop.
The retailer claims the changes have led to increased traffic and conversion rates and that the site is on course to see sales growth in the crucial Christmas shopping period.
The food business continues to outperform the market as its “specialist” positioning helps set M&S apart from the competition. Sales at stores open for more than a year were up 1%, while total sales increased 3.6%.
