Marks & Spencer: still plenty to do
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Marks & Spencer appears to have remembered “what it takes to be a successful shop”, said Gary Parkinson in The Independent.
The group has announced a 20% jump in first-half profits to £308.2bn, eclipsing City expectations, while good cheer was also fuelled by the news that George Davies, the founder of M&S’s successful Per Una womenswear range, has changed his mind about leaving the company following his shock resignation three weeks ago.
M&S has boosted margins by renegotiating supplier terms and changing its supply chain management, says Camilla Palladino on Breakingviews.com: it orders fewer clothes more often, rather than huge piles ahead of the season, thus reducing the amount that need to be shifted with discount prices.
Such cost cuts will be hard to repeat, said Patience Wheatcroft in The Times: “it is the top line that M&S needs to grow”. In the second quarter, clothing sales increased by just 0.2%. M&S is still not converting more “browsers into buyers”, said Elizabeth Rigby in the FT.
Market share is still edging down in all divisions except food. M&S is hoping to appeal to the womenswear market’s desire for “fast fashion” with what it calls a new ‘fabric pool’ in Turkey that should be able to churn out popular items in weeks, and is also accelerating its store-refurbishment programme to entice punters. But with Rose claiming his biggest threat is consumer confidence and sounding cautious on Christmas, sales look unlikely to improve quickly.
At least M&S has persuaded the “volatile creative talent” George Davies not to go, said Martin Dickson in the FT. Per Una’s contribution to turnover may not be huge, but it generates foot traffic and “a touch of flair”. Rose “deserves an award for diplomacy”.
But one headache is Primark, the discount retailer that has just reported a 30% rise in annual operating profits amid a 12% jump in underlying sales in the six months to September. Primark can produce the latest fashion trends at bargain-basement prices, which has drawn in “increasingly stingy” consumers, said Stephen Foley in The Independent. And with half its suppliers in Asia and half in Europe and the Middle East, the group can both replenish popular lines rapidly and keep prices low, said Sophy Buckley in the FT. According to Richard Hyman of retail consultancy Verdict, “it will be taking a hell of a lot more money on the high street and should scare its rivals”.
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