Granny pants: can M&S continue its turnaround?
Granny pants: can M&S continue its turnaround?
A view from Andy Nairn

M&S is shaking off its dusty image at last

Every time M&S release a new set of financial results, commentators argue over whether the figures represent a turning of the corner for this venerable...

That the retailer still arouses such passion suggests the latter fate is still some way off.  And the latest results provide some evidence that the supermarket is indeed turning a corner. 

Leading the good news in its results, as ever, is the food division.  The grocery market has been thrown into turmoil by the success of the discounters, with all the major players sucked into a downward spiral of price cuts. But M&S has, admirably, stuck to its guns. 

The grocery market has been thrown into turmoil by the success of the discounters, with the major players sucked into a downward spiral of price cuts

The retailer has consistently used advertising to highlight its leadership in quality food and held back from excessive promotion: the latest figures show this has been rewarded by a 30 basis point (bps) increase in gross margin.

On-trend buying

But the real encouragement comes from general merchandise.  While sales didn’t quite meet expectations but they did tick up in the fourth quarter and gross margin was up 190bps. 

This is significant given the much-documented travails of general merchandise’s problem child – fashion.  A combination of more on-trend buying and more efficient sourcing finally seems to be paying back. 

Most famously, a suede skirt became a cultural phenomenon (and instant sell-out), after being worn by Alexa Chung.  Allied to bold moves, such as the introduction of branded trainers and a strong performance from the younger Limited Collection, the latest figures suggest that the store is shedding its dusty image without alienating its core base of older customers.

The final piece of good news relates to the recovery of M&S.com.  A new website was unveiled to great fanfare last year, but got off to a difficult start. 

The redesign was so dramatic that existing customers found it difficult to navigate.  Worse still, a change of platform meant that previously stored details had to be re-entered all over again. 

To cap it all, the site suffered from a series of distribution problems in the all-important run up to Christmas.  These teething problems seem to have been addressed now – and not a moment too soon.

Sunnier outlook

So, is this the turnaround for which many have been waiting?  Well, it would be nice to see stronger topline growth, to demonstrate genuine customer demand as well as increased efficiency and margin control.  But the fundamentals, which ultimately lead to sales success in retail, do seem to be heading in the right direction. 

In a nutshell, M&S is finally selling more of the right products, in the right places, at the right prices, to the right people – a simple formula but one which has proved elusive in the past.

Of course, there is still much to be done.  But CEO Marc Bolland has emphasised that his strategy for recovery is to take things "step by step".  The latest evidence suggests that the retailer has finally found its feet.  Hopefully the next set of results will show it really hitting its stride.

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