Marks & Spencer’s chief executive and chief finance officer presented a united front on the need for continued transformation to make the retailer “special again”, as they revealed a further drop in profits in the retailer’s full-year results today.
Profit before tax fell to £523.2m for the period, and group revenues also declined – down 3% to £10.37bn for the year to 30 March.
In a frank dissection of its recent struggles, chief executive Steve Rowe stressed “today’s numbers are in the context of a transformation: M&S is changing faster than at any time in my career”.
“Every single aspect of M&S is undergoing scrutiny and change. We’re judging ourselves as much by the pace of change as by the numbers.”
Chief finance officer Humphrey Singer reiterated the need for continued transformation across M&S – change through its new leadership team, its store estate and the supply chain are key focuses in its turnaround plan.
Rowe explained that “right-sizing” M&S’s store estate was paramount, “making sure it is fit for the future, modern and accessible”. He said the existing portfolio had “legacy issues”, and the ongoing “reshape programme” is as much about “resizing and reopening stores as it is about the closures”.
Every single aspect of M&S is undergoing scrutiny and change
Steve Rowe, Marks & Spencer
Singer confirmed that M&S will still close around 110 stores – the same figure detailed in its 2016 plans: “We will ‘churn’ the estate as we see fit. Across clothing and home there will be fewer but larger stores: a net total of 25% of store closures.”
“The right thing to do is to reflect the change in trading between stores and online [ecommerce is predicted to make up a one-third of sales in the next few years].”
Rowe added that M&S will close or relocate 20 high-cost, small food stores across its estate. However, it will open larger food stores in better locations that have car parking and cater to families.
Singer confirmed: “We will lose footprints from full-line stores, but gain footprint from Simply Food. In the end we will end up with same amount of stores we had previously.”
In its results, UK clothing and home revenues fell by 3.6% overall, and 1.6% on a like-for-like basis. Online clothing and home revenue grew by 9.8%. In total 22% of clothing and home UK revenue now comes from online, up from 19% last year.
An overly large and confusing offer, supply chain issues and poor availability of popular styles were in blamed in part for the disappointing performance of the division.
Addressing the issue of a lack of best-selling products, Rowe said: “With the change in operations, processes and people, we were always going to have bumps in the road.
“We didn’t buy enough [popular products] – yes, we are disappointed. But customers have been supportive of changes in the road to style and fit.”
He confirmed that part of the problem in the last quarter was that M&S had had issues in reshaping its denim ranges, which included one of Holly Willoughby’s collections.
For autumn 19 M&S will reduce the number of lines by 12% and will refresh its Autograph brand.
Rowe added that M&S has more work to do on pricing and “continuing to remove confusing promotions”, to help volume sales growth. M&S will lower prices on more than 400 lines.
He also said that loyalty card Sparks “needs work” because “it’s not delivering what customers want or what we want”.
Chief digital and data officer Jeremy Pee, who joined M&S in 2018, is expected to sign off on the launch of a new Sparks proposition later this year.
Meanwhile, Rowe added that M&S’s new leadership team is key to helping transform the retailer and “driving behavioural change” throughout the company.
They can help make M&S “bigger, bolder and faster on the way to making M&S special again”.