M&S sales still falling in H1 but it sees October upturn
The latest news on the recovery attempt at M&S was released on Wednesday with half-year results that were titled “far-reaching change – delivered at pace.” But they could also have been titled “sales and profits fall again,” as the half to September 28 remained challenging.
Group revenue fell 2.1% to £4.86bn and pre-tax/pre-adjustments profit fell 17.1% to £176.5m. But at least pre-tax profits rose 51.5% to £153.5m, due to “due to lower net adjusting items”.
The company admitted it had been a difficult half, but saw signs of an upturn after the period end with improved sales during October in its important Clothing & Home (C&H) division.
However, overall it was a weak half in the C&H unit. Like-for-like sales there were down 5.5% with total C&H revenue falling 7.8% to £1.569bn and a lower gross margin.
CEO Steve Rowe was relatively upbeat though. "Our transformation plan is now running at a pace and scale not seen before,” he said. “For the first time we are beginning to see the potential from the far-reaching changes we are making.”
While it may be another case of wait-and-see, something we’ve become used to at M&S in the past two decades, there’s no denying that Rowe is taking on the challenge of transforming the business in a way his predecessors haven’t.
“We are making up for lost time,” he said. “We are clear on the issues we need to fix and we are seeing a positive response to this season's contemporary styling and better value product. In some instances dramatic sales uplifts in categories where we have restored value, style and availability illustrate the latent potential.”
Clearly, the company is working hard to get back on track with C&H, but it faced a declining market during the half and availability challenges across both store and digital sales channels. This was due to supply chain issues and a “shape of buy that remained too broad”.
Rowe added: “The [C&H] business has historically been too slow to market. It has had too many slow-moving lines with size ratios and fit profiles misaligned with a family customer profile, resulting in poor availability on the most popular sizes and too much stock and markdown.”
But after 24 months of “cleaning up the confusing mix of own brands,” the Per Una relaunch, for one, seems to be working and “initial customer reaction to the new range, launched in October, has been encouraging,” Rowe said.
He added that more frequent and better planned deliveries are supporting availability, which has already improved significantly compared to last year. October full-price and planned promotional sales increased by 2.7%.
DIGITAL AND INTERNATIONAL
In digital, M&S is aiming for fast growth and wants to achieve one third of UK sales online. It’s making progress, but very slowly. Online revenue at M&S.com increased only 0.2% and UK C&H online revenue was level in a flat market.
While traffic to the website grew by 8%, “reflecting strong growth in mobile traffic and paid search, conversion was lower”.
Meanwhile, the International business “made solid progress building the foundations to deliver profitable growth,” the company said. However, one-off factors and shipment adjustments “acted as a brake on revenue” in H1.
Revenue of £445.6m meant a constant currency fall of 1.7%, reflecting a weak performance in the Republic of Ireland and lower franchise shipments.
But the joint venture in India “continues to strengthen,” with 15% of product now designed for the market, six new stores opened in H1 and there are plans for the launch of a local website in H2.
Online, the launch of three country-specific websites and improved customer returns facilities supported growth of over 20%.
Copyright © 2023 FashionNetwork.com All rights reserved.