Marks and Spencer’s full year results, announced this morning (24 May), show a return to growth, surpassing expectations in a challenging market for retailers. Sales are up across both food, by 8.7% and the store’s clothing and home ranges, by 11.5%. Online sales increased by 4.8%, while in store by 14.99%
Chief executive Stuart Machin said in a statement: “Despite facing significant headwinds, I am encouraged by the strong foundations established last year and excited about what we can achieve in the year ahead.”
The results are a stark contrast from two years ago, when M&S reported a 34% fall in clothing sales in the financial year ending in 2021, following several lockdowns. While supermarkets were able to remain open throughout the pandemic, food sales at the retailer grew by just 1.2% that year.
How M&S plans to become ‘more relevant, more often’After several challenging years, particularly for its clothing and general merchandising division, does the relative success of the past 12 months mark the start of a turnaround?
Perceived value in grocery
As the cost-of-living crisis continues to hit shoppers, M&S Food has focused on keeping the cost of every day grocery items – such as bread, milk and baked beans – as low as possible. Its ‘Remarksable value’ range advertises ‘locked prices’ on 150 of the retailer’s most popular grocery items. Sales of this range are said to be up 40% in the previous financial year and now appear in the basket of one in every five M&S customers, according to the retailer.
According to YouGov’s BrandIndex, which measures consumer opinion of popular brands, the perception of value at M&S’s grocery business has increased significantly, reaching a score of 0.3 in the past six month, up from -4.2 in the six months prior. Its Index score, which measures all-round brand health, including reputation, satisfaction and impression scores, as well as value, is at 39.1 over the past six months, up from 35.7 in the six months prior.
Chris Daly, CEO at the Chartered Institute of Marketing, said the company appears to be “successfully negotiating consumer belt-tightening”.
Premium grocery items have also been successful this year. The famous M&S ‘Dine-In’ meal offers have proved popular as consumers look for cheaper alternatives to eating at restaurants, with an expanded range now including ‘steak and chips’ as an option.
“M&S is right to continue to invest in its premium positioning,” Eleanor Simpson-Gould, senior retail analyst at GlobalData, commented.
“Differentiating more on product quality and range innovation will boost the retailer’s attractiveness to shoppers looking to dine in more as the price of a meal out escalates.”
Online grocery sales stalling
However, despite these in-store successes, M&S’s partnership with Ocado seems to be struggling, as the trend for online grocery shopping continues to decline post-pandemic. Revenue generated by the venture was down 1.2% this year, despite a growth in the number of active customers. M&S took a £29.5m net loss as a result – that’s a big drop from 2021/22 which saw the retailer take £13.9m in profit from the partnership.
Simpson-Gould said that these figures demonstrate that “retaining online shoppers post-pandemic is not proving easy”.
How M&S is using its Percy Pig ‘mega brand’ to stay culturally relevantShe added: “Increased movement of customers across grocers has increased Ocado’s active customer numbers but failed to improve revenue. With lower food price inflation beginning to feed into the retail market, M&S must capitalise on positive growth from the UK online grocery market and continue emphasis on driving down overhead costs from Ocado operations.”
M&S said that it is looking to reduce the cost of the partnership, with plans to close Ocado’s Hatfield site already under proposal. It also plans to expand its range on the site and work with the online supermarket to increase efficiency. M&S said it plans to return to profitability on the partnership “in the medium term” and on a media call, the retailer said it remained “really confident” that it could grow through Ocado.
Clothing on the up
In the past, M&S has struggled with the perception that it’s clothing and homeware ranges were targeted towards older consumers and less on-trend than its high street rivals. However, this year its clothing and home sales were up 14.9% in store, up to a total of £2.5bn. Click and collect sales were also said to be up by around 20% and the retailer says that more than a third of its online sales now take place on the M&S app.
M&S’s app and its Sparks membership scheme were also key sales drivers. The retailer says that it now has around 4.3 million users registered with the app, recently boosted by the ’12 days of Sparks’ promotion at Christmas.
On a press call following the unveiling of the results, M&S CEO Stuart Machin said that it plans to invest in its online sales set up, with the aim of having a single log in for all its customers across its bank, membership scheme and online store sites.
Machin added that M&S had taken a “more confident” approach to buying, with a focus on its core lines. It highlighted women’s denim and casual dresses as particular strengths. The retailer also claimed that its ‘style perception’ is now improving.
YouGov’s BrandIndex shows a modest increase in customer perceptions of M&S as as fashion retailer, with the store now scoring 43.3 in the last six months, up from 42.6 in the six months prior.
The retailer also found success in its omni-channel proposition, with it now working with more than 140 brands. Recent launches include Clinique and Benefit, which recently joined the beauty offer and an increase in the number of brands available in The Sports Edit, which launched in early 2023.
M&S on the ‘staggering’ impact of its ‘Anything But Ordinary’ brand platformM&S said that shoppers for these third-party brands were attracting new customers who were then more likely to purchase items from the M&S core range as a result.
GlobalData’s Simpson-Gould explained that these partnerships were improving M&S’s style perception. She added: “M&S’s investment in omnichannel fulfilment, evolving clothing & home ranges alongside third-party brand partnerships will stand it in good stead to retain growth in non-food for FY2024.”
M&S says that it expects to see “modest growth” in the coming financial year, driven by new stores and its omni-channel offer. It acknowledged the ongoing struggles of inflation and an uncertain economic outlook. It expects to spend an additional £100m to increase staff pay and an extra £50m on increased energy costs in the next financial year. However, it said that the “strong foundation” created by this year’s results were encouraging, despite the challenges.
The Chartered Institute of Marketing’s Daly added: “Today’s results demonstrate a company that remains committed to its values, incorporating its key unique selling points into its marketing strategy, and boldly targeting new, younger customers during challenging economic conditions.”