“It was the best of times, it was the worst of times”. So goes the opening line of Charles Dickens’ novel A Tale of Two Cities. Someone quoted it to me last week to underline the point that in a recession there lies turmoil for some but great opportunity for others.
And it was with those words ringing in my ears that I appraised the contrasting results of two of our biggest high street players, Marks & Spencer and Primark.
M&S revealed on Tuesday that its pre-tax profits had plummeted by 34% to £297.8 million in the 26 weeks to September 27 on a 5.7% drop in like-for-like sales, while value giant Primark saw its profits swell 17% to £233m with like-for-like sales up 4% for the year to September 13. So much for trading up during a downturn.
While the M&S numbers weren’t pretty, they weren’t unexpected either. They had been telegraphed in trading updates and were not as bad as the worst of analysts’ predictions.
Executive chairman Sir Stuart Rose is maintaining his position that M&S is a strong business in a weak market and he is not wrong about that. But there is work to be done, not least on cost-cutting, and it looks like the chain’s expensive advertising campaigns with their even more expensive stars could bear the brunt.
The market seems to be going against M&S at the moment, but it is playing right into the hands of Primark, which has never spent so much as a brass farthing on advertising in the UK. Just as it looked like ethical and ecological concerns would turn consumers off its cheap as chips disposable fashion, along came a bigger concern, the credit crunch.
The appeal of its rock-bottom prices was duly renewed and the good times, for Primark at least, continue.