M&S looks forward to improved Christmas

Marks and Spencer's food business has delivered 19 consecutive quarters of like-for-like growth. Photo: Bloomberg

Marks and Spencer's food business has delivered 19 consecutive quarters of like-for-like growth. Photo: Bloomberg

Published Aug 15, 2014

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London - British retailer Marks & Spencer (M&S) is close to having both its food and general merchandise divisions “firing on all cylinders” and expects a better Christmas after poor clothing sales hit last holiday season, according to its food business head.

While the 130-year-old firm’s general merchandise (GM) division – clothing, footwear and homewares – has posted 12 consecutive quarters of declining sales at stores open longer than a year, its food business has delivered 19 quarters of like-for-like sales growth.

“This business hasn’t had foods and GM firing on all cylinders together for a long time. I think we’re very close to having a position where both the food and GM businesses are working positively,” Steve Rowe, the executive director of food, said yesterday.

“There’s a love affair between M&S and the consumer, and when you upset your lover, sometimes it takes longer than you think it’s going to take for them to forgive you,” Rowe, a 25-year M&S veteran, added.

While the food business was continuing to win market share with a strategy to specialise more and focus on quality and innovation, Rowe said there were also “really good positive signs” coming out of womenswear, its biggest clothing sector.

“I don’t think we’ll have a poor Christmas [in GM],” he said. “We all believe it is time to deliver.”

Under Marc Bolland, the chief executive since 2010, the company has posted three consecutive years of profit decline despite spending £2.4 billion (R42bn) to address decades of under-investment.

Analysts do, however, expect profit to rise significantly over the next three years.

The company’s food business is outperforming the wider British grocery market – which is growing at its slowest rate for over a decade – and contributed over half of total group sales of £10.3bn in the 2013/14 year. The firm does not split out food’s profit contribution, but analysts estimate it generates about 35 percent of UK profit, reflecting lower margins and higher operating costs than in general merchandise.

M&S, which trades from 809 UK stores, 763 of which sell food, has a strategy that sets it apart from the big four UK grocers – Tesco, Walmart’s Asda, Sainsbury’s and Morrisons – which are being hurt by the rise of discounters Aldi and Lidl.

Tesco and Morrisons have issued profit warnings, while Waitrose has also cautioned its period of unprecedented investment would affect profit.

M&S has not suffered the same pressure from discounters, because it sells mainly own-label produce. – Reuters

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