M&S claims ‘renewed competitiveness’ in clothing and home following profit boost

Marks & Spencer’s clothing and home division has delivered a “substantial” improvement in profitability over the first six months of its financial year, following the “re-engineering” of its model.

This has contributed towards a boost across the business, which has returned to profitability after reporting an £87.6m loss during the same period last year. The retailer posted a profit before tax of £187.3m, which is almost £30m higher than the £158.8m it posted two years ago, before the impact of the pandemic.

Compared to 2019, clothing and home sales were down 1% as lockdown extended into the first week of the period. Nevertheless, operating profit in the division before adjusting items reached £156.2m, up from £109.6m two years previously.

Speaking on a call with press today (10 November), CEO Steve Rowe said: “In clothing and home, the re-engineering of the operating model is now showing potential to reverse years of decline. At the heart of this is better product.”

Over the half year, the retailer made the most of its scale by moving into growth categories such as athleisure, with Goodmove now its number one full-price women’s brand.

M&S has also introduced more “focused” category management, reducing its total option count by around a quarter compared with three years ago and therefore improving its line-item rate of sale. For example, in women’s denim sales per option were up 56% compared to 2019, with 29% fewer options across the category.‘Reaffirming our credentials’: M&S’s marketing director reveals three year focus for clothing and home

There are “early indicators of renewed competitiveness” in most categories, Rowe claimed, “with increased market share overall and in both the online and store channels”.

Clothing and home sales have continued to shift online, with the division recording online sales growth of 60.8% while store sales dropped by 17.6%. Online now accounts for 34.4% of clothing and home sales.

The first half of the year also saw M&S relaunch its recently acquired Jaeger business, with an “encouraging” customer response. Combined with “strong initial sales” from M&S’s emerging platform strategy – through which the retailer sells third-party brands such as Sloggi, Ghost and Clarks – branded sales are contributing around 3.5% of total online sales, as the average online basket size hits more than twice the average for M&S.com.

The combination of these changes has enabled the retailer to shift towards ‘every day low prices’, removing its “intensive” promotions of the past and reducing the volume of stock into the clearance sale by 50%. M&S claims to have seen improvements in customer perceptions of value as a result, while maintaining its quality credentials.

Rowe added that it would be “naïve” not to acknowledge that the business has benefited this year from the exit of several competitors from the high street, including Debenhams, Topshop and Wallis. However, he maintained that the boost has been driven in the main by the efforts of the M&S clothing and home business.

Speaking to Marketing Week earlier this month, M&S’s marketing director for clothing and home, Anna Braithwaite, said the retailer was looking at a three year journey to revive fortunes, which will “reaffirm” its style credentials, increase its focus on children, family and home products, and build upon the new brand platform: ‘Anything but Ordinary’.

Food and festivity

Last week M&S launched its Christmas advertising campaigns for both food, and clothing and home, the early reaction to which has already been “strong”, according to Rowe. With the food ad bringing the brand’s Percy Pig character to life for the first time, sales of Percy Pig products have doubled over the weekend, while on the clothing and home side searches for family pyjamas have tripled.

Food sales grew by 10.4% over the first half of the year, driving an increase in operating profit before adjusting items from £92.2m in 2019 to £143.7m.

According to Kantar data, M&S was the best performing UK grocery chain over the 12 weeks to 3 October in terms of market share growth, with a boost of 20 basis points. Meanwhile online grocer Ocado, in which M&S has a 50% stake, grew its sales by 35.7% – but its market share stayed flat at 1.7%. M&S Food expects social media to be ‘bigger’ than TV for Christmas campaign

There has been a “sharp” improvement in customer value perception, Rowe added, while average basket size on everyday shopping trips remains around 30% higher than pre-pandemic levels, even as the frequency of trips is recovering.

M&S said its food strategy moving forward is to shift to larger stores to offer greater choice in core categories in a more “operationally efficient” way. The format has now been implemented in 29 new and renewed stores, including 14 during this half year.

Sales in renewal stores opened in the current year increased 15.7% over the period and by 19% in September, compared to 2019.

The retailer is now anticipating profit before tax and adjusted items for the year to be ahead of expectations and in the region of £500m.

“This strong performance has been driven through the combined effects of the Covid bounce back and, importantly, the transformative work we’ve undertaken to reshape M&S,” Rowe said. “It is clear that the underlying performance across all of the main businesses is improving.”