The headline figures of Marks & Spencer’s recent results don’t make for great reading. The retailer fell to a £201m loss for the 52 weeks to March 27, compared to a £67m profit the year before, its first annual loss for 94 years. Thirty stores will close.
Like everyone in the sector, M&S has been hit by the coronavirus pandemic that saw in-store demand for clothing and home items drop by 31%. Its cafes were closed and it’s not been able to rely on busy office workers for its heavy food-on-the-go offering. In December the retailer decided not to repay £83.7m in business rates relief.
But M&S's tone is remarkably upbeat. “In a year like no other we have delivered a resilient trading performance,” says CEO Steve Rowe.
The pandemic has offered the chance to accelerate what was an existing strategy. Since Rowe came into the business in 2016, it has been well known he had a restructuring job on his hands (much like his predecessor Marc Bolland).
Beset by an ecommerce operation seen by many as behind the sector, it’s been weighed down by a legacy store footprint in high streets with declining footfall. Its clothing and home business, while showing some pre-pandemic resurgence, has been seen as out of touch and stale. For a long time the strategy has been to stabilise and improve the areas in decline, while transitioning the business to make the most of growing food sales. In May 2020, M&S announced that it was using the pandemic as a launchpad for its Never The Same Again turnaround strategy (the latest in a long line of such plans). By focusing on streamlining its store footprint and supply chain, boosting already growing food sales, improving value and accelerating the digital transformation of M&S.com - it wanted to “accelerate the pace and scale” of its transformation and make “three years progress in one”.
The tie-up with Ocado, which was announced in February 2019 and launched in September 2020, is its attempt to add a food home delivery operation. Under the banner of MS2 - M&S has revamped its website, improved the way it handles data. Ten million customers have now registered to its relaunched, now app-based, Sparks loyalty scheme since July.
The results suggest that the strategy has borne fruit during the pandemic. M&S products now account for 25% of Ocado’s basket orders.
Store closures were also hardly unexpected. The 30 newly announced are in addition to the 59 full line stores, 16 food-only and eight outlets that had already been earmarked for closure or relocation. As part of the restructure, 7000 job losses were announced in August, including 950 at head office. The group aims to settle on a fully-modernised portfolio of around 180 stores, down from its 254 currently.
Now that he's fixed "the basics", Rowe is banking on M&S emerging from the pandemic as a much more flexible, and relevant, multi-channel retailer - although it’s not expected to restore profitability within the next financial year. The long-term challenge will be finding a better balance between clicks and bricks.