As thoughts turn to life after Covid, or at least as the effects are mitigated, Marks & Spencer chiefs are confident that the retailer is also in better health.

Marks & Spencer store April 2021

  • M&S will move to ‘core’ of 180 branches but may take up some Debenhams locations
  • Estate to be overhauled to bring out the best of stores as online sales rise
  • Balance of space to shift towards food through its ‘Simply Food’ format
  • Bricks and clicks to better complement each other in key clothing category

The outbreak of the pandemic spurred M&S to act more decisively to address long-standing weaknesses. As they unveiled full-year results, chief executive Steve Rowe and chair Archie Norman maintained that, following the launch of the Never The Same Again programme, the business has moved “beyond fixing the basics to forge a reshaped M&S”.

That new phase includes further changes to M&S’s store estate. Rowe is confident that his bricks-and-mortar presence is ultimately a strength, not a weakness, even as the retailer anticipates 40% of all clothing and home sales coming from online, compared to around 22% pre-pandemic. 

With that in mind, Rowe aims to rebalance the branch network to offer shoppers the best proposition in the best locations.

How M&S will restructure its estate

M&S intends to churn the chain – as rival retailers such as Next have always done – towards higher-quality space. Ultimately, Rowe wants to reduce the number of full-line branches, but, including its Simply Food format, the overall number of shops it operates will rise.

Marks & Spencer foodhall 11

Rowe said that over the last few years – as M&S reshaped its estate for the first time in two decades – 60 full-line shops have been closed or relocated. But the landscape has shifted further and so M&S’s estate should too.

The retailer operated 254 full-line branches at its year-end in early April. Some, M&S reported, “are in long term decline, struggle to cover their allocated central costs as a percentage of sales and cannot justify future investment”.

Over the course of the next 10 years, it will move to a “core” of about 180 stores. However, the thrust of the programme will be relocation and similar initiatives rather than simply closing stores – the retailer is sizing up six former Debenhams stores, for instance.

Rowe said: “Good retailers churn their estates all the time. There are opportunities to make the estate better.

“The dynamics have changed and the effects of the pandemic mean we have to move faster. The good news is that there’s rarely been a better time to acquire new space. We’re committed to stores and believe they can be a true source of competitive advantage. 

“They have to work with online, so we have a brilliant omnichannel presence. Over the course of the last year the trend online has accelerated. It’s therefore prudent we take  a good look at the estate, a good look at the quality of the high streets that we trade in”. 

The expectation is that more stores will open in retail parks, while underperforming high streets will be exited. The plan is that:

  • M&S aims to have 100 shops in “prime retail markets” – think Oxford Street in London or Manchester – compared to approximately 80 today. In such locations it will invest in “renewal, redevelopment, or replacement of existing stores”.
  • It is targeting about 80 stores in ‘core’ markets – towns like Guildford typify such locations – compared to 65 now. That will often involve moving from high streets to retail parks.
  • The 110 remaining branches will be ‘rotated’, such as through relocation as food-only stores or consolidation of multiple stores into one. However, about 30 stores will shut, in the expectation that sales will be recouped in nearby branches or online.
Store grouping  C&H cash contribution margin1 Average cash contribution £m1
Prime stores 25.4% 3.0
Core stores  23.4% 1.3 
Rotation stores 18.5% 0.9 
Total  22.5% 1.4 
1Metrics for 2019/20 adjusted for covid impacts in March 2020. Leasehold stores exclude long leaseholds

The retailer gave the example of the benefits of such an approach, where the Northampton and Kettering shops were closed and Rushden Lakes opened.

Kettering closure £m Northampton closure £m Rushden Lakes opening £m 
Sales 14.3  Sales 24.2 Sales 39.0
Cash contribution  1.1  Cash contribution  2.5  Cash contribution  4.8 
Like for likes, 2017/18 % -12.3  Like for likes, 2017/18 % -7.0  Like for likes, 2019/20 % +6.5 

Bricks and clicks 

As it focuses on an online-first approach, driven by the MS2 division which has a mandate to behave like a pureplay and break with tradition by, for instance, selling third-party brands online, M&S will also make more use of digital technology in stores to create a more omnichannel proposition and better serve customers.

Marks & Spencer Sparks

Marks & Spencer Sparks

M&S is piloting five ‘10x’ stores where the objective is to drive a “substantial increase” in the use of digital services by shoppers, such as contactless bra fitting and pay on the spot technology.

Rowe told Retail Week: “One of the points of differentiation is our omnichannel business, the development of MS2 as a platform, and integrating that with our store estate is what we’re focused on.

“We are delighted with some of the response, particularly in click-and-collect where customers can now walk in with an online order and it takes less than 50 seconds – I’ve timed it, I did it once in 29 seconds.

“Additionally though, [it is about] using technology to sell differently in stores. We’ve been trialling digital technology to sell furniture with online contact [at the White City store].”

On a similar theme, Rowe added that its Sparks loyalty scheme is increasingly enabling M&S to personalise its relationship with customers and offer more tailored promotions and services. 

‘We don’t know what the return to work will be like’

Some of the effects of Covid are yet to play out, such as the impact on city centres where commuters were a big proportion of customers. Rowe expects such locations to return to post-pandemic levels “over time”.

He did not know exactly how long that recovery would take, but observed: “We expect to see change as we get towards June 21, and again in September as there is a real return to work and return to school. 

Marks & Spencer chief executive Steve Rowe intends to reshape the store estate

Marks & Spencer chief executive Steve Rowe

“We don’t know what the return to work will be like, it will vary from location to location.”

M&S’s confident tone about strategic progress overall has resonated in the City where, at the time of writing, the shares were up 10% on the back of the results.

Industry analyst Nick Bubb, however, remained scpetical. He told Retail Week: ”I think the PR spin about ’accelerating the transformation’ of the store estate covers up an underlying indecisiveness and caution, which is driven by both the ever-lasting uncertainty about whether M&S should or can be both a food and a non-food retailer and the arrogance of the corporate culture, which is that the world can stand still while M&S recovers its former glories.

“A better managed business, like Next, would just have got on with it, particularly the move to retail parks, and wouldn’t need 10 years.”

A new phase post-Covid?

An M&S spokeswoman insisted that the retailer has a complex portfolio, which could not be dealt with on a one or two-year basis, but that “quite quick action” was under way to shape the business for the future.

Norman acknowledged in his results presentation that M&S has sometimes seemed to be in “never-ending transformation”, but added: “I think we are in a new phase. The business is emerging from the chrysalis of Covid as a reshaped business.”

If the strategy is right, M&S bosses are convinced that stores will be part of a bright retail Red Admiral to come.