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M&S ups direct-source target to 70%

Marks & Spencer has revealed it is increasing its target for directly designed and sourced clothing to 70% of the total by 2017 in a bid to further improve gross margin.

The retailer previously said it wanted to up direct sourcing to 60% of all fashion by 2017 but has increased its aim following “significant sourcing gains” over the last couple of years.

Marc Bolland, chief executive of M&S said: “Seventy per cent seems like the perfect number for us. We now know we can capture that design ourselves and we are growing our design team to push this further. The gains on GM [general merchandise] gross margin have happened faster than we planned. Our sourcing people have found faster supply routes.”

In the 26 weeks to September 26 gross margin for general merchandise was up 285 basis points, beating the 150-to-200 basis point forecast. M&S has raised its full-year guidance to 200 to 250 basis points.

For the 2013/14 year direct sourcing was 20% of product, in 2014/15 it was 35% of product and the target for this financial year was 50%. Halfway through this year M&S is currently at 57%.

As previously reported by Drapers many UK suppliers have been hit by the move to direct sourcing, leading to redundancies at M&S suppliers Dewhirst, Cheshire Bespoke and Courtaulds.

Bolland said the retailer had “prioritised profitability” over sales for general merchandise and to hold back on discounting in the second quarter was a “deliberate choice.”

“We didn’t want to be on that promotional drug. In September the market was highly promotional but we stuck with full-price sales. The effect was a 1% drop [in sales] but I think our customers appreciate that we are not devaluing the product.”

He added that the retailer had “more to do” to improve sales in fashion.

General merchandise sales, which is mostly fashion, fell 1.2% for the half.

Bolland said the discounting culture on the high street would continue over Christmas. “It will be spikey. Like last year we will see some strong promotions from our competitors and that makes trade more difficult. Black Friday gets shoppers into that discount mentality. We will have to play it by ear and see if we will follow them.”

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