After revealing a healthy lift in full-year profits, Retail Week looks at how M&S plans to continue the momentum.

Marks & Spencer reported its first profit rise in four years

Marks & Spencer reported its first profit increase in four years yesterday, meaning the outlook for boss Marc Bolland is looking brighter.

It may be a sign that his step-by-step approach to turning around the business is paying off, but while food remains M&S’s golden child – accounting for 55% of sales – how will the retailer improve its overall sales?

A specialist food offer

Food is carrying the rest of the M&S business at the moment, with its year-on-year sales rising 3.4% and like-for-likes increasing 0.6%. The retailer also plans to boost the number of new Simply Food stores it plans to open, from 200 to 250 by March 2017.

Bolland aims to maintain this growth in food despite a difficult grocery environment by offering a different food shopping experience.

“The four big have seriously flagged that it’s going to be a hard year, if you’re in food it’s not going to be easier, however, we believe that we are well prepared for that,” he explains.

Bolland also says M&S has positioned itself as a specialist food supplier, which makes it stand out against competitors. “That step away from the supermarket environment has been the right strategy for us,” he says.

Last year the retailer launched 1,700 new food lines thanks to its chefs and product developers, who travel the world for inspiration to create ready meals and convenience food. The M&S Taste range, which is based on Asian food sold 6 million items last year.

M&S’ boss says customers shop for food differently at its stores. “Around 40% of our shoppers come in to shop for tonight, and take something home for tomorrow for breakfast maybe,” he says.

“That’s completely different from somebody going into one of the larger supermarkets with a shopping list. Lots of people come in [to M&S] and they have no idea what they are going to have for dinner that evening and that’s why they like all these new things like the Taste of Thailand, because they say ‘let me be surprised’.”

Better fashion quality

More disappointing for the retailer is general merchandise – which includes fashion. M&S reported a sales drop of 2.5% with like-for-like sales down 3.1%, but there is hope of an uplift after its fourth quarter sales inched up 0.7% for the first time in 14 consecutive quarters.

“As a full year, this is not good enough,” Bolland says, noting the retailer is continuing to improve style and quality, as well as becoming more on-trend with designs.

Even though results for clothing are disappointing he says sales of dresses over the last year were up 18% thanks to M&S prints being much more fashionable than before. M&S also had a trend over autum/winter and into spring/summer of ‘into the blue’, which was based around jeans, and resulted in an 11% rise in sales of the product.

One item that has gained a lot of attention in the fashion press is the retailer’s suede skirt. It was launched online and in flagships last week and Bolland says the retailer sold 500 of the £199 skirts in 24 hours, as it became one of this year’s must-have purchases.

But when it comes to status products like the suede skirt, he says the retailer needs to be careful to strike the right balance between availability and exclusivity.

“When you now walk into a store, every two to three weeks you’ll find new product”

Marc Bolland, Marks & Spencer

“That’s a very good retail mix, because what it does is gives people that real opportunity to get it, while at the same time you don’t want to be seen in something that everybody is wearing the next day if it is something that is presented as a fashion item.”

Bolland says the retailer is also improving its response times when it comes to introducing new lines, now narrowing the window from design to store to a mere four to five weeks.

“When you now walk into a store, every two to three weeks you’ll find new product in-store,” says Bolland who explains that a couple of years ago its new products came into stores every two months.

Despite these positive trends, Freddie George, analyst at Cantor warns it may be difficult to continue momentum in both food and fashion.

“Although we believe that at last there have been some visible improvements to the fashionability and quality and more consistency with the womenswear ranges over the last year, it will be a challenge to keep the positive momentum going in sales in both general merchandise and food,” he says.

Online improvement

M&S.com also faced a difficult year with sales down 2% after it replatformed its website away from Amazon in February last year to be fully controlled in-house. But the retailer saw growth in its fourth quarter, with a 13.8% increase in sales, so there is hope the worst is over.

“It’s a difficult thing to do for a company to do the online development yourself,” he says, noting that he had expected the website to take nine months to run, but instead it took 12.

“You need to build the infrastructure to launch a more contemporary business and be competitive going forward.”

M&S.com now has a team of around 200 people working on its website which it bought in-house last year. The new site provides M&S with monthly updates, improved tablet functionality, as well as better performance and speed to checkout. That has led to a 15% increase in website traffic, while mobile and tablet traffic is up 33%.

“Would you have thought four years ago, that M&S would be the retailer Apple would want to work with?”

Marc Bolland, Marks & Spencer

Bolland says the new website’s editorial content is helping with conversion, through elements such as outfit building and food recipes.

He also says Apple approached M&S to build an app for the Apple Watch while the device was still in development in order for the tech giant to test how applications could be used.

“Would you have thought four years ago, that M&S would be the retailer Apple would want to work with?” he says. “That’s a good sign of confidence that the 200 people are looking very much ahead.”

International issues

The retailer also reported a turbulent year for its international business, sales were down 2.1% on a constant currency basis.

Bolland says this negative impact was outside of the retailer’s control. He points to the regional macro-economic issues in countries including Russia, Ukraine and Turkey and political instabilities in Syria that have hit consumer demand. Combined with currency fluctuations, it was difficult for M&S to manage.

Despite that, Bolland says its partner in Istanbul, for example, is a long-term associate that is not going to shy away of staying in countries experiencing difficulties. “We share the support of this partner and we are absolutely going to stay in this country.”

On the plus-side, M&S reported an impressive performance in markets including India (up 23%, with like-for-likes up 11%). China and Hong Kong also reported growth, with plans to continue opening more stores later this year.

Mixed bag

But it is still too early to understand whether this is a turning point for Marks & Spencer, and it will take until July when its first quarter results are reported to find out whether its improvement online and general merchandise over the first quarter has managed to continue momentum.

If M&S can pull out more iconic fashion items like its suede skirt while satisfying its loyal consumers, there is a chance it can once again join the ranks of the high street fashion supremos.