Following today’s release of M&S figures for FY2020/21; Chloe Collins, head of apparel at GlobalData, a leading data and analytics company, offers her view: “Though M&S now insists it will never be the same again, its FY2020/21 results prove that it should have changed its ways sooner. Group revenue within the most disruptive of years fell by £1,015m to £9,166.9m, driven by a 31.5% decline in UK Clothing & Home sales, as its failure to fully embrace and develop its online channel in prior years left it vulnerable throughout COVID-19. Though online sales grew 53.9% during the period, the fact that this was coming off a more muted base than competitors like Next, meant that it was unable to offset the decline in store sales, despite the presence of its Food division which offered it some protection.
“That being said, with its MS2 strategy now firmly in place to ensure the company has an ‘online first’ approach, plans announced to ‘rotate’ its estate and modernise its remaining full line stores, and positive trading in the first six weeks of FY2021/22, with sales impressively above the comparative period two years ago, investors have seemingly regained some confidence in the business, with its share price rising c.5% in early morning trade.
“The announcement that M&S’s partnership with Ocado contributed a share of net income of £78.4m will also have pleased investors, with this allegiance proving fruitful in a year which saw home delivery of groceries soar in importance, with many switching to online food shopping for the first time. The switch from Waitrose products has been successful, with M&S products accounting for a larger share of the average Ocado basket (over a quarter). While the Ocado business is planning capacity growth of 50%, M&S’ own food operations failed to achieve growth this year, unlike the big supermarkets, due to its presence in city centres and travel locations, which suffered significant revenue declines. However, its switch to focus on value within food has been wise, as shoppers have become more economically cautious due to the impacts of the pandemic, and will continue to be at least in the short term.
“As COVID-19 has triggered a predicted long-term shift towards more casual dressing, M&S has reacted by extending its Goodmove activewear range to include men’s and kidswear, and advertising more smart casual work attire. However, the largest change to its clothing offer has been the launch of third-party brands on its website, including Nobody’s Child, Joules and Phase Eight. Though it was late to the party on this, and it has heavy competition from Next and John Lewis which stock many of the same brands, exclusive ranges offer M&S a way to maximise the potential of this offering, with many styles in its Limited Edition M&S x Ghost collection selling out. M&S also acquired Jaeger in January 2021 for £6m, though significant changes will be required to revamp the premium brand and make its traditionally formal ranges appealing to consumers in a post-COVID world.”