On the back of a 62% decline in pre-tax profits across full-year 2017/18, Marks & Spencer has announced plans to streamline its store estate, and develop into a 'more commercial, more digital' business, a move that appears to have gone down well with investors.
However, a leading retail analyst has warned that the group's online aspirations 'appear ambitious', suggesting that while M&S continues to shrink its store base, 'digital isn’t ready to take up the slack'.
'Digital First'
Scott Ransley of Stifel said that M&S management's plan to become a 'digital first' organisation, boasting a third of Clothing & Home sales online, by 2022, is "only achievable if M&S can double recent growth rates, implying online market share gains.
"This requires near perfect execution of IT and logistics initiatives – no mean feat in a business this size. Store closures may encourage customers online, only to drive them into the welcoming arms of Next, John Lewis and Amazon."
'Facing Facts'
Ransley added that M&S chief executive Steve Rowe's 'facing facts' introduction to the retailer's results presentation "comprised a list of challenges that might leave investors wondering how it has managed to survive this long: bureaucratic culture, behind the curve in digital, more to do on style and value, underperformance in food, inefficient supply chains (plural!) and a store estate not fit for the future."
He added that while M&S' consumer base has narrowed, in order to grow it again will take the retailer into the competitive 'families' segment, where discounters prevail.
"It is difficult to see how M&S can be more attractive to families without lowering prices, sacrificing clothing margins and opening more stores in convenient locations," Ransley said.
Read more about what leading retail analysts had to say about M&S' full-year performance.
© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
