With a raft of management changes and poor first quarter sales, retail analysts have been frank about where Marks & Spencer’s has gone wrong.
“The ongoing outperformance of food is making M&S a structurally lower gross margin business. Clothing still accounts for roughly half of profits, however, so issues there are in need of a solution and the management changes are thus positive, but most don’t occur until October, so it is very early days.” Investec analyst Bethany Hocking
“M&S’s problems in womenswear go far beyond the weather, as they are clearly losing market share. M&S desperately needs some stability in top management, but Marc Bolland is fighting for his own job, so he has, somewhat predictably, made poor Kate Bostock, the head of M&S Clothing, the scapegoat for the poor first quarter trading.” Independent analyst Nick Bubb
“Overall this is a very weak set of numbers that is explained only in part by poor trading conditions on the high street; the rest of the explanation comes down to issues that are specific to M&S. Indeed, the trading period covers some more robust months of overall retail growth and M&S’s figures compare relatively badly with competitors operating across similar sectors.
Moreover, the results for general merchandise are set against comparatively subdued numbers last year demonstrating that M&S has gone from a position of standing still, to one of moving backwards.” Conlumino managing director Neil Saunders
“M&S has reported another quarter of sales declines in general merchandise highlight some self-inflicted problems M&S is having in addition to the poor weather impact. Clothing underperformed as a result of continuation of merchandising issues reported in April for the fourth quarter (not enough stock of best sellers etc) but they are confident they have taken steps to be back on track for Autumn/Winter, with changes to the buying and merchandising team. Espirito Santo analyst Caroline Glover
“SOS M&S. That’s the inescapable conclusion to be drawn from these numbers. No surprise then that the company’s head of general merchandise Kate Bostock and head of menswear Richard Price have jumped ship. But the pain could be just beginning. The unsold sun hats, summer dresses and so on now threaten to become a millstone around their necks.”
“Marks may be forced to bring their end of summer Sales forward to mid-summer, or risk being caught with lots of difficult-to-sell stock come Autumn.” Retail Vision director John Ibbotson
“Today’s update confirms that food sales held up well in the quarter but that general merchandise sales were weak, driven by disappointing clothing demand. A number of management changes have been announced, with a reshuffle of the senior team and the announcement that Kate Bostock is finally to leave the business. Overall these changes should help to restore some stability at a critical time for M&S but may time to bed in.” Singer Capital Markets analyst Matthew McEachran
“Although the shares continue to trade at a significant discount to their historical average valuation, we continue to rate them Hold as we wait for staff moves to settle down and for signs that weakness in general merchandise (for example loss of clothing market share) has been arrested. We prefer to recommend buying shares in Next instead, and in the mid cap space, NBrown, Asos or Dunelm.” Panmure Gordon analyst Jean Roche