Comment: M&S continues to provide colour contrasts

Martin Flanagan

Martin Flanagan

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LONG faded are the days when Marks & Spencer was unthinkingly referred to as a bellwether for the retail sector. That description stemmed from the belief that M&S was a decently run, competitively priced Middle Britain retailer, able to ride the good economic times and be resilient in the poor, and where it went the performance and prospects of the retail industry would follow.

However, years of relatively static or falling M&S sales, seemingly continual strategic and operational “evolution” for more than two decades, and the past three years of declining profits, have put paid to that bellwether tag.

Next week Marc Bolland, group chief executive and the latest to try and reinvent the M&S wheel, is expected to unveil the 15th consecutive quarter of same-floorspace falling sales in its clothing-dominated general merchandise division.

More positively, the City consensus is that the sales decline in Q4 will have moderated significantly to 1.2 per cent from a near-6 per cent slide in the previous quarter.

The latter was hit by online order distribution problems, that have apparently been largely rectified. However, in the broader picture, Bolland is five years into his tenure and the latest evolution of the group, and that is a lengthy period for his strategy to be still seen by many as being at some sort of crossroads.

But, curiously, it is. You can look at M&S’s progress in one light and questions form an orderly queue at the checking out. Fifteen consecutive quarters of not being able to turn the company’s core womenswear offer positive again despite a train of new fashion gurus being imported.

Multi-billion pound investment drives in embracing new-look stores and online revamps, plus a less flag-planting attitude to foreign expansion than was the case under his successor Sir Stuart Rose, have far from routed the sceptics.

But, equally, the fashion press luvvies have welcomed the new women’s lines, and one should not be sniffy at a decline in the rate of decline in clothing sales in these times.

Meanwhile, M&S’s food business remains a “reassuringly expensive” consumer vote-winner even after five years of austerity and bloodletting further down the food chain.

The City has got used to the food arm regularly increasing like-for-like quarterly sales, as if the supermarket price wars did not exist. Analysts expect them to have risen again next Thursday, up by 0.3 per cent despite a deflationary price environment, and compared with 0.1 per cent growth in Q3.

Bolland has also made profit margins a focus, refusing to chase sales at any price in order to just end that depressing cycle of revenue decline. There should be more positive news on those margins next week, and again it is some more evidence for the defence of the group’s strategy.

M&S has also trod a middle path on price promotions. It has not eschewed them totally, but it has certainly been towards the back of the retail pack on such margin-erosion measures in the past few years.

The company’s share price also suggests there are as many buying into Bolland’s strategy as doubting it, the stock having risen 27 per cent in the past six months and 16 per cent in the past year.

So it is a more balanced picture at M&S than the story the headline numbers are set to project next week. Perhaps frustratingly, the retailer remains a work in progress the outcome of which remains a matter for conjecture.

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