Marks & Spencer today reported a 1.1% like-for-like uplift in first half food sales with growth stepping up from 0.6% in the first quarter to 1.6% in the second. Retail Week takes a look at how the food division has achieved growth while its general merchandise arm struggles.
M&S has been able to rely on consistent growth in its food division to support a difficult performance in general merchandise in the last year due to a range of tactics.
Perhaps the most vital of these elements has been, quite simply, what’s on the shelf. The constant renewal of range – 25% of its products are new each year – combined with the launch of 1,000 new lines and its new 700-product strong value Simply M&S range have given shoppers more choice on a consistent basis.
Moreover, long-term strong performers including fresh bakery products, ready meals and its Dine In meal deal have given the retailer further traction to add to short-term draws like its 4.1 million selling Jubilee biscuit tin.
Oriel Securities analyst Jonathan Pritchard tells Retail Week: “They are renewing their ranges constantly, they have improved 1,000 products and availability is up three percentage points in 18 months. It’s a big positive for them. They have done a lot of work in getting their price image on point. It’s a potent mix.”
An improved store format with new fixtures and layouts has also chimed well with customers. At the end of the first half the retailer had completed work on 96 of its Simply Food formats - both within larger M&S stores and also standalone shops.
The stores themselves are also well positioned to capitalise on a convenience market which is set to be worth £44bn by 2017, the IGD forecasts. The retailer’s Food on the Move format at Baker Street is aimed squarely at the lucrative lunchtime market. While competition on the high street remains tough - it competes with the large store estates of Sainsbury’s Local and Tesco Express in particular, as well as Waitrose, The Co-operative and in future Morrisons’ M Local format - M&S’ work to improve price perception appears to be paying dividends. M&S food growth was up 3.2% in the four weeks to September 10, according to Nielsen.
Pritchard says: “They have invested in gross margin since 2008. There’s no substitute for actually taking prices down and John Dixon deserves credit for taking a tough decision here. It’s clear that Morrisons are still struggling and Tesco has not yet turned the corner. They are in the sweet spot of the growth market – convenience.”
M&S is in a strong position with sales momentum and a good product and store proposition going into the crucial Christmas period where shoppers trade up to premium products.
However, it must be remembered that, while 1.6% like-for-like growth is good for a difficult market, it’s not rocket fuelled growth. Pritchard says: “It goes to show how used we are to lowly like-for-likes that we are getting excited by 1.6% like-for-like growth.”
So while the grocery market is not gunning on full steam, M&S continues to bolster its seat at the top table by carving out a strong niche.