CEO stops the rot at high street chain
M&S upturn in womenswear gives Bolland breathing space
Food sales for the fourth quarter once again outperformed the market, up 0.7% like-for-like, while general merchandise, which includes clothing, was up by the same amount, ending three years of declining sales.
Much of the improvement came from fixing the online problems that beset the company’s Castle Donington warehouse before Christmas, but Mr Bolland claimed the new ranges had been well-received by customers.
Clothing sales were up 0.6% and he said the turn around came in a “difficult, deflationary quarter” with prices falling.
“Customers turned to us for special times of the year as well as everyday quality they can trust,” he said.
“We had a record Valentine’s Day and launched over 350 new products over the quarter. We continue to invest in price in order to stay competitive while protecting the gross margin.
“General Merchandise performance improved this quarter, driven by continued focus on product quality and styling. Our Spring/Summer ranges have been well received by customers, as evidenced by strong improvement in customer research scores, as well as great fashion press coverage, including that of our iconic suede skirt.
“In line with our plan for the year, we promoted less and focused more on full price sales. However, this was partly off-set by more stock going into the Christmas sale as a result of the unseasonal conditions through the Autumn/Winter season.”
M&S.com sales returned to growth, with the website metrics including traffic, conversion and customer satisfaction continuing to improve. The new distribution centre at Castle Donington performed well during the quarter.
The company report its full year results on 20 May.
Paul Thomas of the retail consultancy Retail Remedy comments:
“Last year this venerable brand came perilously close to becoming an also-ran. Modest though it is, M&S’s turnaround shows it’s not ready to be put out to pasture yet.
“For a while its hugely successful food range ceased to be a trump card – and began to look like the only card Marc Bolland had left to play.
“But after a disappointing Christmas, this year the largest part of the business – women’s clothing – has finally begun to make progress.
“A 0.6% like-for-like increase in clothing sales over the quarter will hardly set pulses racing, but as evidence that the brand’s core business has ceased misfiring this modest number is worth its weight in gold for Marc Bolland.
“He still has a mountain to climb. Look beyond the flagship locations and many M&S stores are still a mess of baffling sub-brands. The relaunched website fails to inspire, and the brand’s ill-starred new distribution centre is still suffering teething problems.
“However Bolland’s cost-cutting and investment plans are showing signs of bearing fruit. Dealing with the brand’s legacy problems will take much longer – but the return to growth after such a long decline will give him the breathing space he needs to drive through more changes.
“The voices questioning whether M&S can continue to sell only its own brand clothing won’t have been silenced, but these results at least hint that M&S is returning to what it should be – a clothing retailer with a successful sideline in food, rather than a successful food retailer with a moribund clothing business holding it back.”
Graham Spooner, investment research analyst at The Share Centre, said:
“Investors will be hoping that this could be the long awaited turning point for the high street chain’s clothing division. Online sales continued to shine with a rise of 13.8% in the final quarter.
“Marks and Spencer has a strong reputation of good value and high quality produce, and this is a reputation that should pay dividends, especially as there is the potential for people to become more conscious of some extra money in their pockets for discretionary spending. The prospective dividend yield of 3.5% is a further attraction.
“The group may have turned the corner as clothing sales have stopped falling, whilst other aspects of the business are also on the rise. For reasons such as these, we recommend Marks and Spencer as a ‘buy’ for medium risk investors looking to achieve a balanced portfolio.”
>> Daily Business Comment: A woman’s touch