M&S ‘regaining momentum’ as profits more than halve

Marks & Spencer claims it is “regaining momentum” despite profits more than halving as the fallout continues from the cyberattack earlier this year which has cost the retailer an estimated £300m.

In its interim results for the 26 weeks ending 27 September, M&S made an adjusted pre-tax profit of £184m, compared to £413.1m the same time the previous year. This figure does include an insurance payout of £100m.

Despite the disruption, group sales rose overall by 22.1% to £7.97bn compared to £6.52bn in the same period last year, driven in part by the inclusion of Ocado Retail. M&S Food sales rose 7.8%, but fashion, home and beauty sales declined 16.4%. On a call with media today (5 November), CEO Stuart Machin described M&S sales as “broadly level with last year”.

M&S admitted the “recovery curve has been slower” for fashion, home and beauty, which it attributed to the pause in online orders from late April to early June, and click-and-collect not resuming until August. The latter was a major blow as online accounts for nearly 50% of the retailer’s sales. Food was also back online quicker than fashion, home and beauty.

Despite the significant disruption, M&S claims to have driven a “relentless focus on value” and improvement in style perceptions for fashion. Online transactions for fashion rose 5% this month.

“We’re making progress every single day and, as I said at the start, our winter stock will arrive just in time for the cold snap and we are all hoping for a decent cold snap,” said Machin.

I am against loyalty pricing. I don’t think it fits with us trying to be, or aiming to be, the most trusted retailer.

Stuart Machin, M&S

He reiterated M&S is still on its ‘Reshape for Growth’ transformation journey, which has included opening 15 new or renewed stores during the first half.

“M&S is not a moment. It’s a constant. We have a clear plan to reshape M&S for continued growth and we have never lost sight of this despite the disruption. That is why we accelerated our transformation during the half with investments in three priority areas: store rotation and store renewal, supply chain modernisation and technology transformation,” said Machin.

In fashion home and beauty, there was a “strong response in stores” to the latest Autumn campaign. The M&S CEO claimed the retailer is now number one for style according to yesterday’s (4 November) YouGov report, and “number one” in the fashion market share for the last 12 weeks, according to Kantar data.

The retailer claims to “outperform the market” in food, boasting three years of consecutive volume growth. The M&S CEO quoted the latest Kantar figures, which put M&S as “the fastest growing grocery retailer” over the latest four-week period.

“In the last 12 weeks, we’ve actually served 800,000 more customers year-on-year in the half and customers made 14 million more shopping trips to M&S Food than the same period last year. So, more people are shopping with M&S more often,” he added.

M&S clothing and home ditches festive hero ad for ‘mini content drops’

Looking ahead, the company is focusing on “operational resilience”, as well as investing in personalisation and loyalty. As part of this, Sparks is set to relaunch next year to “support customer engagement” and drive “broader and more frequent” shopping visits.

On the loyalty relaunch, Machin said it can be expected “around March and April”, but “there’s going to be no huge big ‘Ta-da!’”.

“There’s no big bang relaunch. There will be things happening over the coming years, but I am against loyalty pricing. I don’t think it fits with us trying to be, or aiming to be, the most trusted retailer,” he added, saying he’d “rather stick to everyday pricing”.

M&S also wants to grow to 420 food stores, with Machin noting the success of product innovation. According to the retailer, investment in “trusted value” drove overall sales growth of 29% across its Remarksable Value, ‘Dropped & Locked ’ and ‘Bigger Pack, Better Value ’ lines.

Machin noted how the retailer’s “viral Strawberry sando” sold a million units in just four weeks.

The M&S results also called out the success of Ocado Retail, with revenue up 14.9% to £1.5bn and orders increasing 12% driven by growth in active customers. This growth was attributed to “more effective marketing” improved retention and increased frequency.

Social-first

Yesterday (4 November), M&S announced its launch on TikTok Shop for a beauty pilot, as the retailer looks for different ways to connect with customers – particularly a younger generation – using creator and short-form video.

This social push follows the launch of the retailer’s ‘Love That’ YouTube fashion series, M&S Man channel on Instagram and its wider approach to the festive season. Instead of one hero ad for fashion, beauty and home, the brand is doing mini content drops to tap into social-first storytelling.

Marketing director Sharry Cramond previously told Marketing Week the retailer’s recipe for virality is “getting involved at the very beginning” and thinking with a social cap on during the product development phase.

This taste for experimentation follows the opening of a curated clothing store in Battersea last year. Machin said the store is working in line with the company’s expectations, but explained it’s not “the centre” of the strategy, with the brand focusing online and on other stores.

Heading into the festive season, Machin said the focus will be on trying to give customers “a good Christmas”, which means prioritising value and having “thousands” of new lines dropping in the run up to 25 December.