Marks & Spencer needs “urgent” change following a full-year profits collapse, its boss has announced. What has gone wrong, and how much longer can the retailer remain a stalwart of the high street?
What do the latest figures reveal?
M&S has reported a 62.1% fall in pre-tax profit to £66.8 million in the year to March 31 as it was dragged down by £321.1 million in costs linked to store closures.
The results come a day after M&S said it will shut more than 100 outlets by 2022 as part of a five-year transformation programme.
What does M&S say is the cause of its problems?
Chief executive Steve Rowe says the “need for change is urgent” and a plan “to restore the basics” is under way, noting that Wednesday’s results reflect the costs that come with the transformation.
He has talked of “transforming our culture” to make M&S a faster, lower-cost, more commercial, more digital business.
It has long acknowledged that its problem is particularly acute for its clothing arm – like-for-like sales fell by 1.9% in the year – in the face of pressure from competitors such as Primark and Next, but its food offer – once the leading light of its operation – has also suffered as cost-conscious shoppers turn to rivals.
What is the problem with M&S clothing?
M&S has put in years of efforts to turn around falling clothing sales but its position has shifted from a retailer able to attract all age groups to a place seen by younger consumers as catering primarily for older generations – despite glamorous advertising campaigns and well-received collections from models Rosie Huntington-Whiteley and Alexa Chung.
Younger shoppers have been lured away by competitors which are cheaper, faster and more aspirational, while the so-called fast fashion retailers like Primark and H&M have improved their quality, and a new category of “grown-up” stores such as Reiss and Cos and have emerged.
Meanwhile, older shoppers have complained that they are no longer being stylishly catered for, and there has been consistent criticism that the in-store experience is confused and uninspiring.
What is happening with its food business?
Until recently M&S’s food offer kept hopes for growth at the retailer alive, but it has had to scale back its programme for opening more food outlets. Margins have also been squeezed by a weaker pound pushing up the cost of stocking the shelves.
What do the analysts say?
They point out that all traditional retailers have faced a perfect storm of rising costs, cautious shoppers and the relentless growth of online competition.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said M&S was “simply struggling to make progress in a world where a compelling mobile app is every bit as important as a presence on the high street, and considerably less expensive”.
Maureen Hinton, group retail research director at GlobalData, said the closure of yet more stores will hasten the retailer’s decline unless it can shift the lost sales to its online channel and transfer to its other stores.
Aren’t most high street retailers struggling at the moment?
Yes. M&S is far from alone in reporting that it has been struggling in the current environment as Brexit upheaval leads to cost pressures and cautious spending on the part of shoppers.
The beginning of the year saw the first January drop in consumer spending since 2013 and a sharp 4% fall in spending on the high street, according to Visa, as Britons continued to cut back on spending.
Richard Hyman, who has analysed the retail sector for more than 30 years and predicted last year that 2018 would be “the year of retail distress”, has said: “There are too many mouths to feed and the consumer economy is in a very weak condition and has been for a very long time, and there is no evidence of that changing.”