Marks & Spencer has announced a better-than-expected increase in profit for the first half of its financial year, driven by sales growth across both its food and clothing & home categories. Despite the improvements, which led to the retailer committing to the first dividend payment to shareholders since the pandemic, its chief executive Stuart Machin declared himself “positively dissatisfied” with the company’s progress on realising one opportunity – personalisation.
The retailer earlier today told The City food sales for the 6 months to 30 September were up 14.7% year-on-year, with clothing & home sales up 5.7%. Profit before tax was up 75% to £360.2m.
Online sales increased 4.6%, while margin increased to 9%, an increase attributed to fewer items sold at discount and via cheaper click and collect. Despite the gain, more can still be done with its site and app, particularly around personalisation, Machin insists.
On a call with analysts following its interims announcement, Machin explained: “We’re positive about the progress and the work we are doing, but we have to be dissatisfied because there is so much opportunity. We’re on track, there’s lots still to do but there’s lots of opportunity still ahead of us.
“We know we’ve done some work online, [around] the app, how to make it more personalised.. we haven’t made as much progress there as we would have liked.”
M&S currently boasts 9.2% of the menswear market in physical stores, it claims, but online that figure falls to just 4.9%. Womenswear is a similar story, where the 9.5% of the market M&S controls offline only translates to online share of 4.5%.
Machin added: “We need to do a much better job when it comes to the app experience and personalisation… we’ve really got to get some momentum behind that.”
In its Sparks loyalty programme, there is also room for improvement, he added. The company has 18 million people signed up to its Sparks loyalty scheme, but that only 5 million are considered ‘active’ in using the card once a month or more.
Machin said only 20% of Sparks users are currently taking part in the personalisation trials, saying: “We know in the team we’ve got work to do. If you can imagine 18 million people, if you can imagine [if] we really get our data in shape, then this is such a big opportunity.”
Machin claimed the investment the company has made in improving perceptions of style for its clothing range is paying off. He stated that in womenswear overall style perception has risen 5% in 18 months, while menswear style perception has gone up 7%.
In September the brand signed actress Sienna Miller to be the face of its womenswear as part of its ongoing mission to shift style perception. Since then it has expanded that mission to menswear with the first dedicated menswear campaign in eight years.
Machin argued that M&S has always been very strong on value perception, where “it’s not just about price, it’s about the price you pay for the quality.” The brand, he declared, has been seeing an increasing number of younger consumers as result of its ongoing marketing campaigns and new ranges.
That shift in demographics, said Machin, could also buoy up the development of its Sparks programme: “We talk about the average customer whether its demographic stage or other… when I’m looking at the customers we are attracting a younger customer. They are not going to sign up to a Sparks programme unless it is really relevant to them, but it could be a big unlocker in the future,” he said.
Despite gains in most of its business, homeware and furniture was pinpointed as an area for improvement, in particular the opportunity for significant growth in online sales of homeware.
Meanwhile, the company was more muted about its opportunities for the second half of the year with reduced margins a potential problem, as a consequence of more discounting in the second half, particularly during Black Friday and New Year sales.
Richard Price, the brand’s managing director of clothing & home, is focused upon reducing the proportion of items sold at discount, Machin said, adding effort would to avoid excessive discounting across January, for example.
The company also noted that it does not see its ownership of Ocado contributing positively to the business within the next few years, seeing that as a three-to-five year development. The grocery delivery business posted an underlying loss of £23.4m for the first half of the year.