Marks & Spencer Group’s interim results are a story of ‘two out of three’, according to Ray Gaul, vice president at Kantar Retail.
Across the group’s three reporting divisions, two divisions are growing top line revenue. These are Food, growing at 4.4% for the first half year, and International growing at 2.3% in the period. The third division, however, is Clothing & Home. The non-food division delivered a surprise performance with flat sales of 0.0%.
“From an overall total group performance the positive non-food result should provide optimism to the company and its shareholders,” said Gaul. “This division is the core of the group’s brand and media image and has become a strong focus for management’s hopes of a turnaround with several industry heavyweights joining M&S’s all-star team. Notable new hires are Jill McDonald, formerly CEO of Halfords, and Archie Norman, a restructuring specialist who takes over as chairman. With CEO Steve Rowe, this trio will certainly be hoping that their newly unveiled Paddington Bear Christmas campaign can revitalise the full-year picture for non-food and deliver positive revenue growth for the full-year.”
The Food division is also performing well despite an increasing number of obstacles, Gaul added. “Management is clear on these challenges and appears to be ready to take on both Aldi and Lidl who have increased the quality and the number of options available to consumers in their meals-for-tonight ranges. Likewise, the company appears confident it can compete with Tesco and Morrisons who have made significant strides improving their premium own-label offers.”
Amazon’s takeover of Whole Foods puts a new competitor in the frame, added Gaul. “It will certainly be interesting to see how the ‘meals for now’ competition heats up with M&S’s newly launched home delivery programme coming out of testing phase right as Amazon’s Whole Foods integration programme comes to fruition. The expectation should be to see some sparks fly.”