Steve Rowe presented the latest M&S results on Wednesday and is stepping down as CEO of the company he led through its latest transformation.


The executive summarizes the results covering the 52 weeks to April 2 as «good results achieved by a very resilient company.»

However, the company has said that profits will remain flat for the year ahead as it is investing heavily, has set its exit from Russia on a permanent basis (rather than just temporarily halting operations), is suffering the impact of Brexit and closing or relocating locations to get the right balance in its store network.

Overall, trading in the first six weeks of the new year has been ahead of the comparable 2021 and 2022 periods, including the period of April 12, 2021, when non-core retail was reopened. M&S has delivered «particularly strong» results in Clothing and Home and growth in the total Food business continues to be better than the overall market. However, it expects the cost of living crisis to bite in the coming months.

Looking at last year and using the comparison period running to March 28, 2020 (because of the problems caused by the pandemic in the 2020/21 financial year), the company said that pre-tax profit rose to £522.9 million from £403.1 million previously. Net profit rose to £309 million from £27.4 million.

Revenues rose 6.9%, compared with two years ago, to £10,885 million. Most of those sales were in the UK, but it is expanding overseas at a rapid pace and, rather than focusing on stores as in previous phases of expansion, it has opted to add international websites. Thus, international digital sales exceeded £250 million, up from £100 million achieved in the 2019/20 financial year.

While its food division was the strongest, Clothing & Home sales were up 3.8%, with digital growth of 55.6% more than offsetting an 11.2% drop in physical sales. Clothing & Home’s «refreshed range and commitment to value» enabled full-price sales to increase by 28.5% and its digital sales now account for 34% of total sales in this category in the UK.

During the year, Womenswear saw good growth in the «big three» segments of denim, knitwear and tops. «A focus on simple, repeatable styles in dresses, supported by popular collaborations with brands such as Ghost, has led to very good results,» they said. In addition, the Goodmove sportswear brand has grown to over £65 million in two years.

Lingerie recovered in core categories such as loungewear, underwear and bras, but Menswear was affected by the mix of formal and office wear. However, it experienced good growth in sweaters, knitwear and underwear.

Children’s Apparel focused on daywear and combined with growth in school wear, achieved double-digit growth. The company says this «provides an important entry point into the brand for family-age customers.»

It also notes that the business is «well positioned to cope with the challenges of inflation and the next phase of transformation.»

View from the top

«When I took the reins six years ago, I was committed to addressing the underlying issues that had eroded the strength of the business and laying the foundations for future growth. What is important about these results is not only the recovery in profits and strong cash flow, but they demonstrate that M&S has turned the corner,» commented Steve Rowe.

«While much remains to be done, the business has demonstrated its relevance and has the opportunity to grow substantially in the future. I am delighted to pass the baton to the new management team of Stuart Machin, Katie Bickerstaffe and Eoin Tonge to lead the next phase,» he added.

The company has seen many changes in recent years under Rowe’s leadership and, in the last 12 months alone, the grocery business has gone from being among the worst performing UK grocery companies in terms of comparable sales to being the best.

On the other hand, «brand perception was weakening and many customers thought M&S was no longer relevant. Now, in almost every customer measurement, we see renewed interest and a great reception,» they tell us.

And Apparel & Home used to have deep discounts of around 35%, which have now almost halved to 18%.

The digital capability of this category also lagged behind the competition and only accounted for around 18% of sales. It is now «competitive in the market and its penetration has almost doubled to 34%».

The company has also revamped its stores and says the new format is working well, as well as improving the efficiency of its digital fulfillment centers.

Under construction

In addition to other improvements, the retailer has undertaken a transformation process that some doubted it could achieve.

«Much remains to be done as we move into our new phase of ‘shaping the future’ and repositioning M&S as a growth-focused business. There are many areas where the business has improved, but there remain three major infrastructure challenges that may yet affect the pace of change and recovery,» Rowe added.

These include the need to invest more in core technology systems, especially in Apparel and Home, where planning and supply chain systems can be significantly improved to drive more efficient trading.

Investment will be made in the Apparel & Home and Food supply chains, as well as in its store estate, where some stores have become obsolete and are poorly positioned compared to the competition. Stores will be closed and new stores will be in more accessible locations. In addition, in some cases, Apparel and Home will have fewer store spaces as more of those sales move to the Internet.

Rowe referred to the fact that Apparel & Home’s in-store sales are more than 25% less than four years ago with only a 10% reduction in space, «making it imperative to reduce space and rotate to newer, better stores.»

The company is «developing a store relocation strategy, moving to modern, well-located locations, in a revamped format with omnichannel capability. We have a pipeline of about 15 new full-line stores over the next three years and about 40 new grocery stores, many of them in the revamped, larger format with pickup services for the Apparel and Home category.»

The money appears to have been well spent, as the 10 new stores opened last year have exceeded the initial sales plan by 11% and are on track to generate a return on net invested capital in just 1.5 years. «The results of the new stores encourage us to accelerate turnover wherever possible,» M&S explains.

The company says that the international business, «together with our partners, generated retail sales growth of 4%. This included a strong performance in the Middle East and digital sales more than doubled to over £250 million thanks to growth in markets with an international store presence and platforms.»

In addition, «the business has an expected cost of £31 million from the full exit from Russia and the disruption to the Ukraine business and will incur a contribution loss, and we are also exploring a number of opportunities to deliver further growth, including through the Reliance joint venture in India.»

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