Marks & Spencer has reported falling full-year profits and sales as it presses on with its transformation plan.
The retailer has made several key changes over the period, hiring executives including chief digital and data officer Jeremy Pee and former Sainsbury’s chief executive Justin King as a non-executive director to bolster its leadership and creating a joint venture with Ocado, which has dominated headlines in recent weeks.
But one of the most interesting aspects of today’s results was its plan to make the most of its store estate. M&S has been adapting its portfolio – it is closing around 110 clothing and home stores over the next four years – but still has 1,035 stores in the UK.
It is now focused on unlocking the power of its stores, whether by updating them or devolving more power to in-store colleagues.
The unvarnished truth
The business appointed retail culture guru Julian Richer as a consultant last year and said today it was attempting to rid itself of a top-down culture.
The retailer said: “We are taking steps to bring back the voice of the stores. Over the years, a business that was famously product- and store-led has developed a ‘head office knows best’ mentality, remote from the customer.
“In our new organisation, we are ensuring that the role of the store is central to all our activity, whether that be active engagement in range decisions for the first time or store managers leading the trading feedback calls which are attended by all commercial executives. Store managers will now have visibility of their own P&Ls, and food managers are given the granular information to act on their own waste.”
“This is about changing culture, making sure we have end-to-end peer accountability and autonomy,” chief executive Steve Rowe elaborated.
“We are a shopkeepers’ business and the centre is there to serve the stores, not to serve itself”
Archie Norman, Marks & Spencer
He said its Monday morning trading call was emblematic of this shift. Store managers now take the lead on conversations and the results of decisions are expected to be visible in stores by 5pm that day.
“We have started to see traction in people in the business saying it like it is and getting the unvarnished truth on the table,” he said. “If we don’t get that, we can’t fix it. Things like the Monday trading meeting are transforming how we operate it.”
Chair Archie Norman added that the change went “to the heart of M&S”.
“We are a shopkeepers’ business and the centre is there to serve the stores, not to serve itself,” he said. “That means being close to it, that means the store manager is king or queen.”
While the stores now have a greater voice, they will also be changing.
M&S has neglected to churn its store estate as its competitors have done over the years and the result is that one third of its full-line stores were opened before the Second World War and three-quarters are more than 25 years old.
Many have not been modernised as they should have been. Norman said 50%-60% of the space in pre-WWII stores was non-retail space, giving an idea to the scale of both the potential of that space but also the challenge and investment needed.
The retailer will pilot a “renewal brand format” but did not explain exactly what it would comprise.
M&S also said today that it has begun “a programme of development feasibility to unlock value from the large, old, town centre stores with surplus space”.
“We own some very, very grand properties in town centres and we believe those can be developed to release value to the business”
Steve Rowe, Marks & Spencer
To that end, it has appointed a new property development director, whose name is yet to be revealed, and expects to “initiate a number of redevelopments in the year ahead”.
Rowe was tight-lipped when asked whether that surplus space in town centre stores could be used as residential space or for concessions.
“M&S has some property assets that are very interesting both in terms of their scale and location,” he told Retail Week.
“We own some very, very grand properties in town centres and we believe over a period of time that those can be developed to release value to the business in terms of new, more modern formats, and possibly other uses and development – and that is about as far as I can go.”
If M&S is able to effectively maximise the value of its store network and get the best insights from the people that work in them, then it will be several steps along the path to recovery.
The retailer may be adopting a ‘digital-first’ stance but good shopkeeping and good stores remain central to its strategy.