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M&S sourcing changes drive up margin outlook

M&S increased its general merchandise gross margin by 150 basis points to 53.7% in the first half, and has now increased its outlook for the full year to a 200 basis points increase, as its decision to “consolidate” its sourcing and discount less begins to bear fruit.

The retailer said the growth in its first half margin was driven by sourcing improvements (contributing a rise of 120 basis points) and less discounting (30 basis points).  

The retailer has consolidated its fabric buy and increased its direct sourcing, with this now affecting 25% of products up from 20% at the end of the last financial year. It said this is on track to be at 35% by the end of the year. 

Chief executive Marc Bolland said: “We are changing our supply base, our orders are shifting from one supplier to another and we are increasing our direct design. It allows us to buy better and get more control.”

Bolland said the retailer had increased its ability to order and manufacture in season meaning that it can respond quickly to consumer demands. “We are bringing in more open to buy. We started to do it in the first half and that will continue in the second half. We have been working closer with factories, and working direct and sourcing direct will allow us to do that,” he added.

The move follows the appointment of brothers Mark and Neal Lindsey as sourcing directors for general merchandise in March.

The Hong Kong-based duo was tasked with overseeing M&S’s global network of regional sourcing offices to improve its bottom line. Both were previously responsible for the growth of Next Sourcing, which streamlined Next’s supply chain to improve speed and efficiency.

Bolland said the amount of discounting for the full year would depend on the market in the third quarter, but insisted he wanted to push full price sales in the run up to Christmas. However, added: “We will continue to watch the market closely and we won’t be blind to it if everyone else goes on Sale.”

 

 

 

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