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M&S turnaround results: Industry reaction

As Marks and Spencer reported a 1.2% increase in fashion sales for the 13 weeks to March 28, breaking a cycle of 14 consecutive quarters in decline, Drapers spoke to analysts and industry insiders to gauge their reaction.

Anusha Couttigane, senior consultant at Conlumino said:

“Over the quarter, M&S saw its first glimmer of growth in clothing in almost four years and its sharp use of celebrity endorsement and social media has helped to create hype around its much-lauded suede ‘skirt of the season’. The retailer’s decision to place customers on a waiting list for the piece, aims to create the illusion of exclusivity. However, with a price tag of £199, exclusivity may not be much of an illusion. The risk of alienating its core middle market customers as it seeks to charm younger fashion followers has been a problem for M&S in recent years. This time, the retailer has tried to combat the issue, by offering a similar, entry-level design in faux suede for £39.50. Although this creates staggered price architecture, it begs the question as to whether this will amplify the disappointment of average purse customers who feel they are missing out on “the real thing” and having to settle for second best.”

Tristan Rogers, chief executive of computer software company Concrete, which works with M&S said:

“New products and better distribution are clearly a contributor to M&S’ rise in revenues, but what is not widely known is the significant progress the management has made in consolidating the internal workings of the domestic and international businesses into one more efficient unit. They are sharing resources and increasingly working from one critical path, which will deliver significant reductions in their go to market costs, helping with the publicised gross margin pursuit.”

Kate Calvert, analyst at Investec said:

“UK sales are ahead with a convincing return to positive general merchandise likely to be taken well as M&S puts the online issues over the last year behind it. Despite this, we maintain our full year profit before tax forecast of £646m as international remains challenging. We continue to see a material gross margin opportunity in general merchandise, which we expect to drive forecast upgrades over the next few years.”

 

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