Marks & Spencer's profits plunge with falling clothes sales to blame

Marks & Spencer's profits plunge with falling clothes sales to blame

November 6, 2019

Marks & Spencer’s profits plunge 17% with falling clothes sales to blame for ‘challenging’ period

  • M&S saw sales slide 2.1% to £4.86million for the six months to September 28
  • High street retailer said it is rapidly pushing ahead with its turnaround plan
  • 135-year-old chain hailed performance of its food business which grew sales 
  • But clothing and home sales fell on back of buying and supply chain issues

Marks & Spencer today revealed its profits had fallen by 17 per cent after sales slumped during a ‘challenging’ period for its clothing and homeware business. 

M&S made a pre-tax profit of £176.5million in the six months to September 28 – in line with forecasts, but down from £213million in the same period last year. 

The high street retailer, which said it is rapidly pushing ahead with its turnaround plan, saw sales slide 2.1 per cent to £4.86million for the six months to September 28.

Marks & Spencer saw sales slide 2.1 per cent to £4.86million for the six months to September

The retailer hailed the performance of its food business which grew sales but saw clothing and home sales fall on the back of buying and supply chain issues. 

The figures illustrate the bumpy path of the 135-year-old retailer’s latest attempt at a turnaround after over a decade of false dawns. 

First-half clothing and home like-for-like sales fell 5.5 per cent, although food sales did increase 0.9 per cent on the same basis.

M&S said that while it forecast some improvement in trading in the second half, market conditions remain ‘challenging’. 

Steve Rowe, chief executive of M&S, said: ‘Our transformation plan is now running at a pace and scale not seen before at Marks & Spencer.

‘For the first time we are beginning to see the potential from the far reaching changes we are making. In clothing and home we are making up for lost time. 

Steve Rowe, chief executive of M&S, admitted it had been a ‘challenging first half’ for the firm

‘We are still in the early stages, but we are clear on the issues we need to fix and, after a challenging first half, we are seeing a positive response to this season’s contemporary styling and better value product.’

Last month M&S launched a new ‘slimmer, sharper, more stylish’ range for men who dress casually at work in a bid to target younger customers. 

The company cut the number of suits and ties by a seventh, and will instead fill the space with casual clothing and jumpers.

M&S is trying to persuade customers it has shaken its old-fashioned and dowdy image, with the new products targeting a ‘busy family-aged customer’.

The move comes as Mr Rowe fights to turn the high street giant around after profits fell from over £1billion in 2008 to £523million last year.

M&S re-launched its largest sub-brand Per Una saying it wanted to throw out perceptions it was ‘too frilly’.

In September it tumbled out of the FTSE 100 list of Britain’s biggest firms for the first time, and last month the company’s stock fell to a 30-year low.

Mr Rowe and his chairman Archie Norman, dubbed the ‘turnaround king’ for his work at Asda in the 1990s, have emphasised that returning M&S to profit growth is a ‘marathon’.

Also last month, the pair admitted their plan to put the home and clothing departments back on track was 18 months behind schedule.

M&S re-launched its largest sub-brand Per Una saying it wanted to throw out perceptions it was ‘too frilly’.

As the same time it announced it would make a foray into ‘influencer marketing’ – where a brand pays celebrities to feature M&S clothes on their social media profiles.

M&S chairman Archie Norman was dubbed the ‘turnaround king’ for his 1990s work at Asda

The struggles in the clothing department come at a time of turmoil in M&S management.

Three senior bosses – in charge of clothing and home, and the company’s supply chain and finances – have been ousted in recent months.

Last month the retailer’s incoming stores boss, David Lepley, turned down the job before he had even arrived.

M&S also announced buy now, pay later options in a partnership with Clearpay, in a further bid to attract younger customers.

The service will be available to online shoppers spending more than £30 from mid-November, allowing the balance to be paid back over six weeks.

The service is separate to M&S Bank, which is run as a joint venture with HSBC.

From prawn sarnies to Paxo’s dodgy pants … 135 years of top Marks and lost Sparks 

From its early days as a penny bazaar — ‘don’t ask the price, it’s a penny,’ went the slogan — Marks & Spencer has come a long way.

Born in 1884, with its first shop (in Leeds) in 1904, M&S is a stalwart of the British High Street. Over the years, it has brought avocados and Chicken Kiev to the masses, equipped generations of men and women with their underwear, and turned the prawn sarnie into a lunchtime staple.

But now the financial fortunes of the retail giant have seen it topple out of the FTSE 100, for the first time since the index was launched in 1984. M&S has had its struggles, but with shares down to a 30-year low last month, it marks a new low for the family favourite. BETH HALE charts the crests and troughs in the store’s 135-year history…

Avocados and chicken kievs 

 

M&S has presided over a veritable shopping trolley of culinary firsts. But it’s for introducing avocados and Chicken Kiev to the average shopping basket for which it’s best-known.

In 1968, it brought us avocado pears. Unfortunately, the name caused confusion — M&S received complaints because the fruit didn’t go as well with custard as ordinary pears! So the retailer renamed them avocados, explaining they were meant for salads — not puddings.

In the 1960s, stores began selling fresh chicken and in 1979, the Chicken Kiev took wing. It was so successful that a factory dedicated to its production was set up.   

Bringing pre-packaged sandwiches to the masses

The spring of 1980 saw M&S start selling pre-packed sandwiches to customers. The first official filling? Salmon and tomato.

There was also salmon and cucumber, egg and cress — nothing fancy, with prices from 43p.

 

Within a year, demand for the ready-to-go sarnie was so strong that the store set out to industrialise the process.

In 1981, the prawn mayonnaise sandwich made its entrance — and it’s been the company’s best-selling sandwich ever since.

Today, M&S makes 5.2 million each year. If laid end-to-end, the prawn mayonnaise sandwiches would stretch from the company’s head office in London to Aberdeen — a distance of 547 miles.

A marker of success came in 1983 when Prime Minister Margaret Thatcher visited the flagship Marble Arch store and pronounced the prawn mayonnaise sandwich ‘delicious’.

Today, one in five sandwiches sold in the UK is bought from the retailer. 

Jeremy Paxman and the undie blunder

 

One in three British women buys their bras from M&S — 45 bras are sold every minute in-store — while two pairs of knickers fly through the tills each second, which equates to more than 60 million pairs a year.

But underwear has also been the source of some of the store’s most notable lows.

In 2008, it transpired that broadcasting heavyweight Jeremy Paxman had taken issue with M&S about its less-than-supportive undergarments.

A leaked email from Paxo to then chief executive Sir Stuart Rose complained of ‘widespread gusset anxiety’.

In his email to Sir Stuart, he wrote: ‘Like very large numbers of men in this country, I have always bought my socks and pants in Marks and Sparks. I’ve noticed that something very troubling has happened. There’s no other way to put this. Their pants no longer provide adequate support.

 

‘When I’ve discussed this with friends and acquaintances, it has revealed widespread gusset anxiety.

‘The other thing is socks. Even among those of us who clip our toenails very rigorously, they appear to be wearing out much more quickly on the big toe. Also, they are no longer ribbed around the top, which means they do not stay up in the way they used to.

‘These are matters of great concern to the men in Britain.’

Ads that revived its fortunes

Her husky voice-over was branded ‘food porn’. Irish actress Dervla Kirwan single-handedly transformed M&S food with her sultry-voiced ‘Not just any food…’ campaign which ran for six years in the Noughties.

The first ad, for a melt-in-the- middle chocolate pud (inset left), saw sales rocket by 3,500 per cent.

 

There were also glossy fashion campaigns featuring model Twiggy (left), and celebrities such as Lisa Snowdon and Dannii Minogue (with her, far left).

After the financial woes of the late 1990s, the first advert in 2005 was credited with turning around the fortunes of M&S.

The Twiggy-effect saw a cream three-quarter-sleeve blouse sell more in one week than any other product in the history of the store. And a collection of £119 travel bags had to be re-ordered to cope with demand as M&S brushed aside its High Street competition.

In 2006, the retailer was named advertiser of the year — a triumphant high. 

 

 A jumble of brand names 

Marks & Spencer has a surprisingly long history of toying with brand names, but in recent years it has been blamed for confusing shoppers.

Per Una and Autograph remain two of a handful to survive from a collection including Indigo, Collezione, North Coast, Orient Express, SP Clothing, View From and DB07 (the latter a range of casual clothing for boys by footballer David Beckham).

 

Holly Loves, a capsule collection by TV presenter Holly Willoughby, has been a success — along with Rosie Huntington-Whiteley’s lingerie line (right).

As for food, for decades the store sold only its own brands, until in November 2008 it reversed that policy and included famous-name foods, only to cut back again in 2010. There was also an expensive experiment with a planned series of ‘Lifestores’, dedicated to household goods and furniture.

But it was dubbed ‘Death-store’ and the chain pulled the plug in 2004 following the concept’s high-profile launch, with shoppers viewing it as too highbrow and too expensive.

Even the phenomenally successful Per Una brand was put under review last year — a sign, said observers, of the depth of the crisis at the store.

Per Una — which means ‘for one woman’ in Italian — was launched in 2001 and in the early days its outfits flew off the shelves. At its height, industry sources said it brought in as much as £750 million a year.

Bitter sweet pig

 

A small pink pig named Percy had sweetie fans in uproar earlier this year, when it emerged that M&S had changed the recipe for the gummy goody — making it vegetarian.

Percy Pigs were launched in 1992 with pork gelatin before the retailer introduced a vegetarian version of the classic sweet, ‘Veggie Percy’, in 2011.

The piggy brand is worth an estimated £20 million, with 300 million sweets sold a year in 100 countries.

End of the ‘easy refund’

For decades, Marks & Spencer didn’t have changing rooms — Lord (Simon) Marks, chairman from 1916 to 1964, didn’t want to give up valuable retail space just so that customers could try on clothes.

But what Lord Simon did preside over was a refund policy that for years was the most generous on the High Street; the ‘no quibble’ policy allowed customers to return purchases many months after they had been bought, with or without a receipt.

Tales abound of those who abused the generous policy that gave customers a full cash refund with a receipt, but also a refund in the form of store vouchers for ‘the price the customer believes he paid’ for goods without any proof of purchase.

Crucially, there was no time limit to the policy so, in theory, a customer could take a product back even years later and still be given vouchers.

All that, however, ended in 2004 when then chief executive Stuart Rose, as part of a range of cost-cutting measures, announced the company would be reducing the time limit to three months.

A high point in terms of economic sense — but a low for traditionalists, who saw it as part of the store’s heritage. It was reduced again, in 2009, to 35 days. 

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