The first half of the year has "not been good" for Marks & Spencer, the British department store group admits. With 17 % less profit and a 2 % drop in turnover, that may well be quite an understatement.
Food to save the day
In the first half of the M&S financial year, which ended on 28 September, pre-tax profit fell by no less than 17 %. Turnover fell by 2.1 % during that "challenging" period to 4.86 billion pounds (5.6 billion euros), as CEO Steve Rowe admits that the results "do not look good".
However, Rowe says his company is already reaping the initial benefits of the transformation plan for the department store chain: in the food segment, sales increased by 1.2 % (0.9 % on a comparable basis). According to the British retailer, this was due to price reductions on a range of core products on one hand, which enabled it, on the other hand, to halve the number of promotions.
Expectations are also high for the merger with online food retailer Ocado, which has been finally completed. It sounds like progress is also being made with the plans to put stocks and purchasing together. However, M&S's online sales were disappointing: even though there were 8 % more visitors to the website, only 0.2 % extra turnover was generated.
Into the heart of fashion
Fashion is the weakest link for the British group: according to Rowe, this category is lagging 18 months behind schedule and the urgency is now based around making up for lost time. However, it is not yet entirely clear how this is going to happen, since the CEO indicates that he urgently needs to look into the heart of the matter.
Over the past period, a new design team has made sure that the garments were more on trend, but the logistics have become so outdated that they either did not reach the shops in time or not in sufficient quantities. As a result, unsold stock accumulated and discounts had to be given, resulting in a comparable sales decrease of 5.5 %.
The CEO says he has already seen an improvement in the last few months and the transformation plan is now well up and running. So far, the chain has closed seventeen loss-making stores, with about eighty closures to go. Throughout the first half of the year, the group was able to save 75 million pounds (90 million euros) in costs.