M&S has issued a positive trading update, saying its “encouraging performance” is proving that its transformation programme is on track.
For the 19 weeks to 14 August 2021, Food revenue rose by 10.8% year-on-year and 9.6% compared to 2019/20. The company said it had outperformed, with core categories and retail park locations trading strongly. It added that its hospitality and franchise units are “progressively improving, although remain below 2019/20 levels due to reduced footfall and the slow return to more normal work patterns”.
M&S reported varying performance across its locations but said that overall trading was outperforming the market. It added that cost reduction programmes were helping to mitigate cost inflation and disruption in the supply chain, as well as the increased absence of workers.
Meanwhile, its Clothing & Home division experienced a significant recovery with revenue up 92.2% year-on-year and down just -2.6% on 2019/20. M&S attributed the result to changes it has made, such as more focused ranges, fewer promotions, and a substantially smaller summer sale, which helped push full price sales up 9% on 2019/20.
The push to online meant that store sales fell by 19.8% compared to 2019/20, with M&S saying many locations remain “in slow recovery”, although its retail parks had outperformed. Its newly formed MS2 division saw improved results as it works on its online and data capability, with Clothing & Home online sales jumping 61.8% on 2019/20.
Finally, International revenue surged up 39.7% year-on-year and was down by just 5.2% on 2019/20, despite the impact of lockdown in India and “substantial Brexit related effects” on the supply of Food to its businesses in the Republic of Ireland and France. The results were helped by the drive into online, with global e-commerce sales up 40% year-on-year and more than doubling on 2019/20.
M&S noted that while some of the group could be due to pent-up consumer demand, it added that the results offer “confirmation of the beneficial effects of the last 18 months ‘Never the Same Again” changes’. It also said that while there is “substantial uncertainty” over consumer demand and supply-chain disruptions, it now expects adjusted pre-tax profit to top its previous forecast of £300-350m (assuming no further Covid-related restrictions).
NAM Implications:
- Key Lockdown pressures (cost inflation, disruption in the supply chain, increased absence of workers and online) reflected in these numbers.
- Important to check how your M&S business compared.
- i.e. ref your fair share in sales and investment.
- Given the shock of Lockdown, separating the two M&S business models has to be an ongoing option.
