Today’s interims from M&S continue the recent narrative. The City has decided this is a margin story, mainly because that is what the company has told it. In this respect, M&S is looking increasingly like WH Smith where selling product has become rather incidental. In the UK retail market which is emerging, driving sales will be THE determinant of who wins and who gives up business to the competition.
As usual food is the star performer, and performance is indeed impressive. Nevertheless, LFLs of +0.2% compare with a market of +1.2% by my analysis, so too much celebration is inappropriate. The product innovation of M&S food is second to none and the introduction of 900 new lines is certainly to be applauded. However, there is a concern around price. Marks has been increasing its prices in recent times and against a market going in the opposite direction, this is not sustainable ad infinitum.
On GM (dominated by clothing and footwear), LFLs are -1.2%. My analysis of the non-food market shows value sales +3.2% and volume +5.2% over the same period. (The clothing market numbers are even less flattering for Marks.) These numbers are all hugely impacted by the record-breaking heatwave for 6 weeks last year running from the start of September and into mid-October. The worrying point is that the quarterly breakdown of results suggests the underperformance is getting worse.
The City will be delighted with the margin gains and the M&S share price today shows where it places its emphasis. Back in the real world, the clue to real significance is in the definition of the word retailing – it’s all about selling product and any meaningful recovery of M&S needs to be built on a significant and sustainable improvement in retail skills