Marks & Spencer is forging ahead on its “Never the Same Again” strategy for a reshaped M&S, which includes closing 30 stores.
In a Nutshell: The company said its priority is to fund investment in its transformation with an eye toward rebuilding its balance sheet. The approach will prioritize omni-channel enhancements, supply chain investments and optimizing stores.
A new approach to buying for apparel and home, coupled with the expanded online capability, is “gaining traction with customers,” said M&S, which has made “huge strides” over the past three years in reshaping its trading principles, buying “fewer lines in greater depth from fewer strategic suppliers.”
“The extent of the shift has been obscured by Covid and the related trading turmoil, but we believe there is a marked improvement in style, shape of buy and value,” it added.
M&S is working to get more than 40 percent of apparel and home revenue from online channels in the next three years, and it is working with key partners overseas to offset Brexit costs, it said.
M&S has elected to close or relocate 59 full-line stores, cutting about 7,000 jobs in the process. It also shuttered 16 food stores and eight outlets. It is planning 17 new or expanded full-line stores over the next two years, including a number of former Debenhams’ doors.
“M&S had 254 full line stores at year end. While practically all Clothing & Home departments in these stores contribute positive cash, a number are in long term decline, struggle to cover their allocated central costs as a percentage of sales and cannot justify future investment,” the company said.
The group is targeting a full-line store base of 180 modernized stores, with 100 in prime retail markets that will grow from the current base of 80, and around 80 doors in core markets that will grow from its existing core-market count of 65 locations. M&S said some high-street units will relocate to retail parks. The balance of its stores will convert to food only, full line or see multiple stores consolidate into one. About 30 doors will be shut, and recapture impacted sales through nearby doors or online.
To improve digital operation, M&S said it would increase online product offerings, and introduce online-only goods. It will also expand its “best seller” and “never out of stock” offerings. “Combined with a curated range of third-party brands we expect a substantial improvement in the online offer in the coming year,” it said. It noted that clothing and home has a base of over 9 million active online customers.
M&S relaunched the Sparks loyalty program last year, shifting from a point-based plan to a more customer-friendly digital experience. M&S also acquired Jaeger’s IP assets, with plans to sell the brand online.
Net Sales: Group revenue for the 53-week period ended April 3 was 9.17 billion pounds ($12.94 billion), versus 10.18 billion pounds ($14.38 billion) in the year ago period. Excluding the 53rd week for the year, revenue for the 52-week period was 8.97 billion pounds $12.67 billion).
The company said apparel and home sales fell 21.6 percent at constant currency, mostly due to lower store sales in Ireland and India, partially offset online sales that doubled in the quarter.
Amid lockdowns and social distancing, M&S reported a “steep decline” in formal and occasion wear.
Earnings: The loss before taxes for the 53 weeks totaled 209.4 million pounds ($295.7 million), against profit of 67.2 million pounds ($94.9 million) the prior year. Excluding the 53rd week in the fourth quarter, the loss for the 52-week period was 201.2 million pounds ($284.1 million). Excluding tax and adjustments for certain items, the company reported a profit of 50.3 million pounds ($71.0 million) and 41.6 million pounds ($58.7 million) for the 53 and 52 week periods, respectively.
The company said the operating loss for apparel and home was 129.4 million pounds ($182.7 million).
Comparing results on a two-year basis, M&S said that overall trading for the first six weeks of the financial year (2021-2022) and since reopening has been ahead of the same 2019-2020 period. Clothing and home sales since stores reopened on April 12 and from digital remain “robust,” it said, noting that international sales continue to be impacted by ongoing restrictions, particularly in India.
M&S said its guidance for 2021-2022 outlook presumes a “gradual return towards more normal customer behavior in its clothing and home stores and its hospitality and food business.
CEO’s Take: “By going further and faster in our transformation through the Never the Same Again program, we moved beyond fixing the basics to forge a reshaped M&S. With the right team in place to accelerate change in the trading businesses and build a trajectory for future growth, we now have a clear line of sight on the path to make M&S special again. The transformation has moved to the next phase,” said CEO Steve Rowe.