Marks & Spencer has been slammed for failing to attract younger customers by analysts at Credit Suisse, who said it was in need of a strategy overhaul.
A report by the Credit Suisse team said M&S’s core shopper was much older than investors understood, and that its trading recovery between 2004-07 was not as strong as suggested.
Shares in M&S dropped by about 8% at their lowest point to 247.5p on Monday, when the 108-page document was issued.
However, the report said two thirds of M&S customers were over 55, with only 30% in the core 35- to 55-year-old bracket being targeted by M&S chairman Sir Stuart Rose.
The report said: “No business can have a long-term future with this type of demographic profile. Young customers are needed to replace the older customers over time and there is no evidence that this is being achieved.”
At the end of January, M&S unveiled its new Portfolio sub-brand, aimed at women aged 45-plus. The brand is intended to fill the gap between the retailer’s Limited and Classic collections.
Issues including positioning, buying and logistics had not been addressed because they required investment in infrastructure, according to Credit Suisse, while M&S had overspent on refits and store expansions, and relied heavily on suppliers to finance recovery.
Credit Suisse claimed that out of the past nine years, M&S’s general merchandise like-for-like sales had underperformed the total UK clothing growth for seven years.
In an unusual move, Credit Suisse suggested a course of action, including creating separate standalone stores for younger customers, or buying a small fashion chain, as well as increasing the amount of direct sourcing. However, it said that the change of strategy needed to achieve this would depress profits for longer than the market is expecting.
Credit Suisse forecast a pre-tax profit for 2009/10 of £328 million, about 30% below consensus.