M&S have reported in their half year financial results that their sales revenue is down by 3.1%. There have been significant changes in the management structure since May 2018 and initial steps have been taken to restore value and broaden family appeal in food.
A process has been implemented to reengineer end to end supply chain, which in turn will remove costs, complexity and working capital. Food revenue was down 0.2% with like-for-like revenue down 2.9% reflecting tough trading and actions to restore trusted value, including fewer promotions and price investment.
Steve Rowe, Chief Executive:
“In May I set out in our “Facing the Facts” presentation, the challenges we face and the steps we are taking in this the first phase of our transformation programme. Against the background of profound structural change in our industry, we are leaving no stone unturned and reshaping our business, its organisation and culture.
“This phase is about rebuilding the foundations of the future M&S and we are judging progress as much by the pace of change as the trading outcomes. Already, we have reorganised into a family of strong businesses in the biggest change to our structure for decades. We now have a largely new, very determined and energetic management team in place. M&S is becoming a faster, more commercial and more digital business.
“We are on track to restructure our store portfolio with over 100 full-line closures and expect to see newly remodelled stores open next year. We are fixing the basics of our online channel and there are very early signs of improvement. Every aspect of our ranges, how we trade, our supply chain and marketing is undergoing scrutiny and change.“
M&S set out the nine key pillars of their first phase ‘restoring the basics’ transformation agenda and will report on the performance against each of these. Their objective is to create a profitable, growing family of businesses within three to five years, bound together by a common consumer brand, employment values, technology and customer data.
They have provided updates on each of the nine pillars (see Full half year financial report for an update on all areas). Key areas which the NFU will be focusing on are:
Protecting the magic but modernising the rest in Food
Food revenue decreased 0.2%. They opened 22 new Food stores in the period. They are in the early stages of reengineering food categories to broaden their appeal and increase the frequency in which customers shop at M&S. Over the last few years the business has become excessively dependant on both short term promotions and complex multi buys. Prices have been reduced in over 100 everyday lines and there are many more to come.
Cost savings of at least £350m by 2020/21
Closure of marginal low contributing stores and the rationalisation of unprofitable categories and ranges will in time unlock significant cost, margin, working capital and maintenance capital savings.
Modernising our Food supply chains
The Food supply chain operates high and demanding standards of freshness and code life. However, both waste and availability remain at uncompetitive levels compared to major rivals. The Food programme aims to address this problem and to date has focussed largely on changing processes at store level. Longer term progress will require more far reaching restructuring of the supply chain.
NFU will continue to have conversations with M&S to understand the impacts on suppliers throughout this period of change.