Marksβs summer chill
Here are two big questions begged by trading statement.
Is the store group's remarkable recovery under its chief executive Stuart Rose juddering to a halt?
And have the recent rises in interest rates simply taken the edge off excessive retail-spending growth or is the UK heading for a painful consumer slowdown?
The economic climate is particularly hard to read right now. Why?
Well, the not-so-glorious summer weather has dampened sales of seasonal kit.
Also - maybe - a bit of terrorist-induced unease around the place is making many of us a little more reluctant to spend spend spend.
But such inclement conditions afflict all retailers.
What matters for M&S's owners is whether it is doing better or worse than its rivals.
The latest figures from the indicate that Marks is no longer trouncing the competition - though the nuances of who's up or down are lost in the aggregates.
What is clear is that growth in Marks's sales per unit of space, known as like-for-like sales, has been falling for more than a year.
Like-for-like sales growth was 8.2 per cent in the first three months of last year.
And in the succeeding quarters, growth fell to 6.2 per cent, then to 5.6 per cent, then 3.8 per cent and now around 2 per cent.
That is a trend.
What's more, growth was weaker at the end of the current quarter than at the beginning - so the decline is continuing.
Which is not to say that Stuart Rose's rebuilding of M&S will crumble, just like the two previous management teams' attempts to rehabilitate this most totemic of retailers.
He has reinforced the group's foundations, say analysts, in a way that his immediate predecessors failed to do.
Even if sales were actually to fall in absolute terms, Rose would probably still be a hero in the City, so long as the sales drop were greater at Next, or Debenhams, or New Look, or BHS.
But retailing is a cruel and unforgiving business. His habitual bonhomie will be tested if competitors start to make up lost ground.
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A very interesting item. We have a flat in the centre of Newcastle, where there is a very well-appointed and refurbished M&S right in the heart of the city. I have it say it is often quiet in comparison to the large, less glossy, but very crowded Primark directly opposite, a few yards away. I guess Primark's margins must be much lower,as the prices are too, but I wonder how much of the M&S story is simply severe price competition? Despite evident higher quality, the price difference is often large. Primark is owned, I believe, by private equity, and so we do not get the regular reports.
One of the major problems with M&S clothes, which by the way are now becoming very lovely, there are FAR too many of the same thing. Which woman wants to walk down the street and see five or six other women wearing the same thing?!
On the same day as M&S posted a slowdown the British Retail Consortium has said UK retail sales rose at the fastest pace in June for the past four months. The BRC believes that interest rate rises, far from quashing demand, have caused consumers to bring forward purchases (presumably yet again on credit) to beat any further rate rises. If so then the consumer is playing a very dangerous game of "chicken" with the Bank of England which is bound to take this as evidence that it has to tighten further. As to M&S, I don't buy their clothes but I do try to shop in their foodstores and the big problem I see is their inability to refill the shelves. I have largely abandoned my local branch as I usually end up having to visit another supermarket in any case to buy all the things that M&S has run out of!
But isn't it the same with Primark? Surely their stuff is sold by the thousands as well?
Perhaps people are wary of spending too much when we have a new PM who is known for his rampant taxation and no longer has a master to keep him in check.
I'm not sure who writes your headlines. The qulaity of journalism is let down by tabloid headlines. Compare the ΒιΆΉΤΌΕΔ ("Marks's Summer Chill" and radio reports which imply that sales are falling rather than growth slowing) with better informed observers (Market - shares rise and FT "Clothing sales help M&S beat forecasts").
Your content is far more balanced but the majority of readers and listeners will take away a different perception.
The truth is that M&S has performed acceptably well in a difficult market. Please control the headline writers.
I have been into a large branch of M&S on many occasions looking for various items of menswear. Without fail, I have left empty handed. Their products are over-priced and very old fashioned. Many of their shirts are poorly finished and are made of material that would be better suited to a discount supermarket range.
The atmosphere in their stores leaves a lot to be desired too, very stuffy, "up it's self" and old style Tory. Leather elbow patches can be spotted with ease as can twin sets and pearls.
My local branch of M&S doesn't even stock menswear. I am reliably informed that their ladies section is pretty grim too.
The food is often good quality, but represents poor value for money.
M&S is stuck in the 1980's - the rest of the world has moved on.
Time and time again they run into trouble yet they keep looking backwards and making the same errors.
Start living in the 21st century M&S or you won't be here by the end of the decade.
As part of the Strategic Planning unit of my MBA, I had to answer an exam question on M&S in late 2002. Tempted as I was to attrribute their problems at that time to my brother-in-law chopping up my sister's M&S card, it was obvious from the data that they make a far better return on their food. Trying to compete with trendy stores like Next at the same time as fighting off Primark has meant the problem is mainly in clothing, but perhaps they should spin that off?
Several of the key problems at M&S are however long term - there was an attitude that the public would be grateful for their output and the takeover of Littlewoods was a disaster yet to unwind fully. That led them to move the food and furnture parts into the old Littlewoods store in Peterborough Queensgate centre while leaving most of the clothing in the main shop at the end of the main street. Food is the key magnet at M&S, but now there is not much to follow up unless you fancy a long walk to the main store -past all the other clothes shop. Simple errors like this are eating away at the business.
If M&S are finding things so tough, how come its closest rival, the John Lewis Partnership not only reported record profits last year (a difficult year for most high street stores) but also itself and its Waitrose supermarkets are voted the nation's favourite shops in various polls?
M&S would kill for John Lewis' trading but also have started to adopt some of their business practices such as the sale of electronics items with good extended warranties.
Profits at JLP have been good this year but even they are finding it difficult so maybe it will be a tough year. Or maybe M&S needs to do more to improve its customer service and loyalty schemes: the backbone of JLP that keeps people returning to its stores week upon week.
To clear up a couple of misconceptions from previous contributors: Primark is not owned by private equity. It is a wholly owned subsidiary of Associated British Foods, a FTSE 100 listed company.
M&S did not takeover Littlewoods Retail, Primark did in 2005.
M&S simply acquired sites in one of Littlewoods previous disposals, as did NEXT and several other retailers
Well it could be part of a general slowdown and it's just that M&S because of their position in the market are seeing the impact first.
However, even if it's not happening now it will soon. Suggest everyone reads the IEA's latest report on oil supplies. Looks like the liquid fuels supply crunch is on its way and when it arrive problems with M&S and the like will pale into insignificance.
Will you please ask Mr.Rose to ensure that his stores stock items which his customers ask for. ie. in our case Marlborough Buns instead of,or as as well as, Outdated Hot cross buns which they stock from Easter untill Christmas.Also he needs to keep an eye on the Pork and Pickel Pie situation.
Other than that keep up the good work.
Best wish George Bath
Very interesting to read this blog in the context of Evan Davis's recent blog (see "Evanomics" link to the right) about mortgage rate increases. Basically what he was saying was that the interest rate rises may not have had much effect yet, but will all bite in spades when people start coming off their fixed rates.
Could the poor figures at M&S be a sign that this is starting to happen? I'm no economist, but I'm guessing that selling clothes isn't a good market to be in if the economy hits a major downturn.
The retailers are struggling becasue of:
1) Warm winter weather
2) Wet summer weather
3) Rising interest rates (though the consequences will not be fully felt for a year.)
M&S have increased their margins,but from a terible position so a relative slowdown was to be expected. However, they still have a long way to go on their store re-fits, so all is not lost!
Re: terrorism fears. Is some bloke setting fire to himself at Glasgow Airport really going to stop me shopping for new underpants? I can't see the connection...
you need to get your size structure right your size 18 is a size 16 in any other store
Like a lot of M&S fans, I supported my local stores when the chips were down and recovery was the order of the day. What did I find in store? A lot of products which I can only describe as seconds. They were cheap, and for M&S they were very cheap. But I soon realised that these bargain packs of T-shirts and their jeans were of inferior quality to others on the High Street. So I stopped buying them.
As for food, I now favour Waitrose. It's a better shopping experience because the staff are more numerous, obliging and knowledgeable, and at M&S I've never quite escaped the feeling that I'm buying food in a clothes shop. M&S must return to its core values of quality and value rather than rest on the laurels of recovery.
M&S's sales have grown 2%. And this is worth all the "end of the world is nigh" articles in the business pages? I really don't understand.
I agree with some of the other comments. If Marks concentrated on food and abandoned the frumpy clothing sections, they may see a turn around. Having said that, some of the food prices are crazy and the modern household isn't gullible enough to be influenced by the brand. Who in their right mind will pay 100% more than the Tesco Finest price just because the factory stamped "M&S" on the box instead of "Tesco"?
Kev.... The need for new underpants is directly related to the distance you are physically from such incidents. :-)
I believe the problem is not limited to M&S, but the entire retail market, particularly the ones serving middle britain.
Series of interest rate rises has reduced the available free money. Anyone with a mortgage, will think twice before buying anything from M&S, and may go to Primark or something cheaper, simply because they have to pay Β£X extra on mortgage, which could have gone to M&S.
This year, very likely to be tough, as the interest rate is expect to go up further, before starts coming down.
In the fashion world, the market leader constantly changes. The store that is most fashionable one month will inevitably be less fashionable the next. Most fashion customers are fickle just like armchair football fans - who were Chelsea before Abramovich? It is unrealistic to expect M&S to grow market share year after year. But for sure, unlike Chelsea, M&S will continue to be up there in the leading pack year after year.
M&S have historically had a good deal of support from investment companies, and particularly recovery-focussed funds.
Do we expect to see these companies sell up their holdings in M&S if it has peaked? Surely that will have the biggest effect on the share value of M&S, not six months of a market-reflective 'trend'?
I know the prices of things in Canada and the Czech republic, as I have links with those places. People there are as well dressed as the British, or better. Yet the shops charge only a half or a third as much as the shops here.
British businessmen and women must be even worse than I thought if they can't make gigantic profits here. Retailing may be "a cruel and unforgiving business", but that hasnβt brought the best people to the top (although Rose seems one of the best).
The British pay double for everything without any quibbling, so someone is making lots of dough somewhere β perhaps firms overpay their suppliers and landlords? In any case, I was rather hoping the Internet would drive some of these laggards to improve their efficiency and cut prices to βnormalβ levels, but no sign of that yet.
Reasons to shop at M+S. They are one of the few companies to do 29 inch leg trousers. I am not a total 'muti' but I need them.
Reasons not to shop at M+S. Walls covered in guilt ridden eco-angst. I know the trousers are 'dolphin friendly' but shouldn't I really be buying second hand hairshirt from Oxfam instead? Oh God I'm depressed. Turn those planet killing lights out. I'm going home.
Sales had shown a remarkable turnaround enabling Mr. Rose to be awared a 68% salary increase but once that was safely pocketed and memories were fading the truth emerges. Grand theft is the standard amongst retail leaders - 1.2Billion to Mr Greens wife and the company had to borrow the money and who pays - females.
Stuart Rose taught the city that by sticking to original business plan rather than carry away with technology, fashion or glamour fads, the company can rejuvenate itself.
He bowed to serve his core customers, which are "healthy" middle class people not zero size models, who are determined to kill themselves by eating nothing. and I think, if 2 years back Philip Green managed to take control of M&S, it would have become Zero Size showroom by now.
To Lucinda Ball,
I think you are seeing only one side of the story. For one thing, it is really true that Rose revived the prospects of M&S. It was not a smoke and mirror show. And this year's difficulty is very much anticipated. Higher interest rates, bad weather, housing market worries, no need to mention raising stealth taxes, thanks to our glorious leaders (who gives tax breaks to multi billion private equity owners, but tax 40% on your overtime payment), particularly hard pressed middle Britain. there are a lot things that makes consumers to be reluctant when it comes to money.
And Rose got 68% raise, because the shareholders thought he is worth of it, otherwise they would have sacked him.
Most of the time the press reports only one side of the story. For example, think, if Rose was sacked, and M&S still had to pay Β£X million for severence of contract, press will report him as a money grabber and fat cat. But the other side is, his career would be almost finished, as no big companies would try to hire a sacked CEO.
I think the comments by Mr Peston are true and accurate but should not overshadow the following facts:
1) George Davies maybe leaving the M&S family and heading elsewhere.
2) Staurt Rose has always been an optimist - considering he did work for the so called "green revolution"
3)Along with the half weighted ideas of the trying to woos shareholders, me thinks that Rose will fall at the next hurdle and run off to pastures new.
M&S is a traditional solid english institution which should concentrate on the food element of the business with a longer term strategy of building business retail in the other parts of the world ( exemplar C&A) and not wait for the hawks of the private equity to re-focus their attention, vis-a-vis sainsbury - do you agree on this Mr Peston?
What I see is that M&S is living in the eighties and provides very very few choices for young people. If I were to buy a dress shirt I would consider looking at M&S but always find their prices higher compared to Next, other than that M&S is never in my clothes shopping list. The only people I see shopping in M&S are the elderly, maybe thats what they want?
About foods, its good however very expensive compared to Tesco, Saisnburys etc and usually you would not be able to get everything if you go to M&S after finishing your work in the evening. Also they seem to focus more on ready made food!