M&S credits transformation plan with festive boost as number of loyalty members doubles

Marks & Spencer is backing its recovery plan after a “strong” festive period, which resulted in a record Christmas for food sales and the second consecutive quarter of growth in apparel and home.

M&S Food sales rose 12.4% over two years to reach £ 1.9 billion in the 13 weeks leading up to January 1. Non-hospitality and franchise sales rose 16.4% to £ 1.7 billion. Compared to the holiday season 2020/2021, sales of food products increased by 10%.

Clothing and home sales rose 3.2% on a two-year basis to £ 1.1bn, fueled by full-price sales which rose 45%. Compared to the Christmas period 2020/2021, clothing and home sales have increased by 37.7%.

As a result, M&S has raised its pre-tax profit forecast for the full year by at least £ 500million, assuming there are no further restrictions or lockdowns related to Covid.

“Throughout the Christmas season, we have maintained a strong business performance, with group sales up 8.6%,” said CEO Steve Rowe, speaking today (Jan 13) at of a press conference.

“This reflects the improvements we’ve made to our products, protecting the magic of food and continuing to develop everyday style in clothing and the home. In both areas, providing trust value.

During the holiday season, M&S also launched its first Sparks app-only campaign, “12 Days of Christmas,” which generated 300,000 downloads of new apps. The retailer now has more than 14 million Sparks users, and the number of memberships has doubled since the start of last year.

This could prove to be an interesting dataset for M&S, which said in November that third-party partner brands such as Nobody’s Child will be able to “make better use” of its large customer database and digital loyalty program.

Reflecting on the festive sales, Rowe highlighted the company’s status as the “fastest growing large in-store food retailer” over the Christmas season.

Larger food baskets were maintained as customers used M&S for their daily purchases. Rowe credited the work done to broaden the appeal of food lines, citing the example of growing demand in basic categories such as dairy, where sales rose 12%.

M&S products also “performed strongly” on Ocado, in which the distributor has a 50% stake, representing around 30% of baskets in December.

Customers recognize that these are not cheap products, but high value products.

Steve Rowe, M&S

One in four fresh turkeys in the UK is sold by Marks & Spencer, with the retailer seeing a 30% increase in roast meat sales and a 147% increase in sales of made-to-order food from its Plant Kitchen vegan line. . Sales of basic prosecco rose 6%, with a surge of 52% for the rosé variety, while M&S sold more than one million of its boxes of bright shortbread cookies for £ 5.

Additionally, the retailer has sold over a million bottles of its Luminous Snow Globe gin, which Rowe described as a “phenomenal” product. M&S is, however, currently in dispute with rival Aldi over an alleged copyright infringement of its gold flake gin infusions.

The retailer says that in November, Aldi began selling The Infusionist line of clementine and blackberry flavored gins, using bottle designs that “copy” the M&S Light-Up Gin.

Last month, M&S called on Aldi to “give up or destroy its inventory and pay damages plus costs,” but the discount chain refused to stop selling the gin line. Without wishing to be drawn to the details of the case, Rowe stressed the importance of innovation to the company.

“We see our development process and our intellectual property as something really special,” he said.

“Our teams have worked a lot to ensure that the M&S product is differentiated, of better quality, innovative and we will make sure to protect this intellectual property and we protect as many small suppliers who develop it with us. Keep in mind that it is the small suppliers in the UK that are often hurt. “

Growth trajectory

In apparel and home, M&S says it has maintained its “trusted value negotiating position”, reducing the amount of products sold on promotion by 66% and lowering inventory levels on sale by 21% from 2019 / 2020.

Online and home clothing sales reached £ 361million, up 50.8% from 2019/2020, fueled by what M&S ​​describes as the substantial expansion in in-store fulfillment. About 50% of online orders are now picked, packaged and mailed directly to stores, an approach Rowe described as a “significant advantage” for M&S over its competitors in providing customers with prompt service. .

In contrast, store sales were down 10.8% over two years, as sales in commercial parks continued to outperform downtown stores.

Rowe explained that the trajectory is for online growth, which the retailer says will account for 40% or maybe even 50% of the business in the coming years.

“One of the great things about Marks & Spencer is that we are truly omnichannel, while others are not,” he said. “What we are seeing is that we can respond to customer requests of different types. Thus, the sales of the retail parks are up over the year and it is the city centers where we have the fewest people who go to work.

M&S Food expects social media to be ‘bigger’ than Christmas TV campaign

From an international perspective, sales rose 5.1% to £ 272million over two years, with online sales more than doubling. The performance was driven by growth in apparel and home sales in Ireland and other key markets such as India after Covid restrictions were relaxed. In addition, M&S said it has generated “strong growth” from online marketplaces and franchise shipments to the Middle East.

Overall, Rowe described 2021 as a “strong piece of clothing, a Christmas present,” in which customers recognized the “strength” of the changes M&S made to its style credentials.

The shift to casual over the holiday season continued with nightwear sales up 25%, knits up 7% and denim up 12% over two years. Freebies have increased by over 50%, with family pajamas accounting for 30% of Christmas store sales.

M&S saw its strength come from beauty products, with its own brand Apothecary up 24% from last Christmas, generating £ 20million in sales.

The retailer also called the reaction “strong” to the small-scale release of spring merchandise two weeks before Christmas, giving the team more “confidence” in the new products that will soon hit stores.

In a broader sense, the retailer has invested heavily in driving demand through marketing during the holiday season, launching separate food and clothing and home campaigns. M&S Food brought the Percy Pig brand mascot to life in its biggest campaign in several years, which, by the end of its first day of release, would have been seen on television almost three times by almost half of the British adults.

The company also predicted that social media would be “much bigger than anything” for M&S Food’s Christmas campaign, especially on TikTok where Percy Pig is proving popular.

This was accompanied by the release of a charity Christmas song from the M&S Food team in Romford, which has built up a large following online. The song has been viewed nearly 900,000 times on M & S’s YouTube page alone.

In apparel and home, M&S focused on its “Anything But Ordinary” brand platform, with a view to re-establishing the retailer in key fashion and gift categories.

In addition to covering everything from TV to printed covers and an activation at Waterloo Station in London, M&S made TV advertising purchasable using Flowcode, allowing customers to scan a QR code on the screen. to buy products immediately.

Resist cost pressures

Reflecting on inflationary pressures, M&S CFO Eoin Tonge confirmed that despite efforts to mitigate rising raw material and supply chain costs, it is “inevitable” that some of this pressure will drive up prices for consumers.

Being largely a private label company has helped M&S gain more control over its prices, said Rowe, who explained that having direct relationships with manufacturers has enabled the team to gain in efficiency in food, clothing and the home.

Rowe added that the prospect of rising inflation increases the importance of the retailer’s “productivity, store turnover and technology investment plans” for the retailer in 2022, as well as its close collaboration with suppliers.

M&S Claims “Renewed Competitiveness” In Apparel And Home Following Increased Profits

“One of the things we would say about Christmas is that our strong relationships and collaborative approach with suppliers for many years, in fact the way we have treated them during the Covid pandemic, I think that means we’ve had a particularly strong delivery from them during this period, ”added the CEO of M&S.

“We see it continuing. Things like inflation pressures, we will work carefully with these trusted partners to compensate as much as possible and continue to provide great value to our client.

Acknowledging that the UK is still ‘in the middle of Covid’, Rowe explained that while buyers may feel tired of life under the pandemic, consumer sentiment towards Marks & Spencer as a valued retailer is at an all time high.

Responding to pressure from discounters, including Aldi and Lidl in the grocery industry promising even lower prices, the CEO of M&S says customers are “desperate for high quality merchandise.”

“It’s one of the foundational elements that we offer, that and innovation. What we’ve seen is a flight to more value rather than necessarily cheap prices, ”Rowe added.

“Our perception of value is the best it has been in clothing for over three years and in food about the same. I think what customers recognize is that these are not cheap products, but high value products and the trend towards more durable products, rather than throwaway fashion, continues. , which plays on our strengths.

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