M&S takes a swipe at discount culture as sales decline

Despite a decline in revenue, M&S credits its decision to “hold its nerve” and resist discounting too soon over the festive period as it returns to like-for-like sales growth for the first time in three years.

Despite contending with “unprecedented” discounting and a number of “disappointing one-off issues”, Marks & Spencer has seen its retail business return to like-for-like growth for the first time in three years.

While total UK revenue fell by 0.6%, it did rise by 0.2% on a like-for-like basis during the 13 weeks to 28 December. Total food revenue increased by 1.5% (1.4% on a like-for-like basis), although total clothing and home revenue slumped by 3.7% (1.7% on a like-for-like basis) and the international business slipped by 2.3%.

Clothing and home online revenue rose by 1.5%, which was lower than expected as widespread competitor discounting in December and lower sales of “big ticket” furniture hit performance.

Speaking on a press call this morning (9 January), chief executive Steve Rowe pointed to improved performance during the third quarter across both M&S’s main businesses, highlighting that despite some “disappointing one-off issues” the UK retail business had made a return to like-for-like growth.

The CEO singled out the success of the ‘Go Jumpers’ Christmas campaign, which was ranked in the top 2% of Christmas ads for engagement by Kantar.

Sales of women’s jumpers rose by 6% during the Christmas period compared to last year, while men’s knitwear sales were up 7%. Some 45,000 Blue Fairisle jumpers, as seen in the campaign advert, were sold over the festive season.

The campaign’s second iteration – ‘Go PJs’ – caused sales of children’s pyjamas featured in the advert to rise by 10%.

In food, Rowe highlighted the retailer’s “standout performance” over Christmas, with revenue up 4% on the year, spurred on by volume and value growth as customers reacted to “sharper value and more relevant innovation”.

“Our investment in trusted value on protein and produce through the rolling programme of fresh market specials and the launch of ‘Re-Marks-able Value’ generated significant volume growth, however, in delivering strong sales growth and driving a faster pace of change waste levels were higher than we would have liked,” said Rowe.

The best-selling jumper from M&S’ Christmas campaign.

Reacting to British Retail Consortium (BRC) data out today suggesting Black Friday overtook Christmas as the biggest shopping week of the year amid the worst year on record for retail, Rowe called out the level of discounting, which he described as “substantially higher” than last year.

He also praised M&S’s decision not to get involved in a significant way with Black Friday and to keep its sales pattern “more traditional”.

“We held our nerve. We didn’t start our sale early like some others and again I’m pleased to say as we walked into that sale, our stock into sale was 12% down on the year and that’s something we’ve been saying we’re going to do consistently and we’ve been delivering it,” said Rowe.

“The long term [impact] of discounting is that customers don’t trust your value. We’ve made it very clear we want to stand for trusted value in the market, we want to give customers great products at great prices and we intend to do that. It doesn’t mean you can’t have the odd deal and give customers a treat, that’s retailing, but the wholesale blanket discounting we saw on the high street this December is not something I want to play in.”

Issues persist

Despite experiencing green shoots of recovery, issues still persist for M&S. Rowe pointed to waste in the food business from buying too deeply in some product lines and problems in the wider supply chain, which he described as “too clunky and a little too expensive”.

The CEO also admitted that M&S got it wrong in terms of the balance of sizes and fits in the menswear collection as it introduced more contemporary, skinny fits, and highlighted a general weakness in the formalwear category as the business continues its shift towards casualwear.

Performance was also dragged down by gifting, with Rowe explaining that M&S needs to evolve as customers become more conservative in the quantity of their purchasing due to sustainability concerns and shift towards higher value gifting.

The 'Re-Marks-Able Value' range.
The ‘Re-Marks-able Value’ range.

“People are buying into higher value products and experiential products. We sold more cashmere this year than we have ever sold before and that’s a symbol of people moving away from some of the lower priced gifts to things that have longevity and value,” he stated.

Rowe did, however, remain positive, highlighting the implementation of improvements to search and personalisation during the period. While SEO traffic and online conversion are both increasing, M&S is clear there are more improvements to come.

M&S Food looks to ‘debunk myths’ over its prices in campaign focused on value

Changes made to the clothing offer earlier in 2019 have “arrested the worst of the issues” experienced during the first six months of last year. He also emphasised that M&S was in the process of building a “stronger team for the future”, which includes the forthcoming arrival of former Tesco F&F CEO range, Richard Price, who will become managing director of clothing and home.

While Rowe won’t rule out the “odd wobble” going forward, he says M&S is moving in the right direction.

“The story of M&S, I believe, is a self-help story, to transform the business and make M&S special again and so I spend less time looking at the external environment than others,” he stated.

“The customer is cautious. The customer is a little bit recessionary in their behaviour and it is a tough market. Everybody could see it. Whether it’s the worst Christmas ever I wouldn’t like to say. We’ve had a good Christmas, but it’s not straightforward.”