This week I have been looking at retailer Marks & Spencer. The high street continues to evolve and is going through a serious period of upheaval. Disruption is being driven by the online shopping revolution, led by Amazon, which is changing consumers’ purchasing habits.
The internet has been a deflationary influence on pricing, which has been beneficial to the “squeezed” consumer. However, with the headwinds from an increase in business rates and the National Living Wage together with inflationary pressures of increased input costs driven by both currency and the cost of raw materials, profit margins of traditional bricks and mortar stores continue to shrink.
Marks and Spencer reported its 3rd quarter earnings in early January, which included its Christmas trading statement. Sales at the company’s Simply Food business underperformed, previously viewed as one of the strongest growing divisions. This was particularly disappointing versus its food peers who reported strong Christmas figures.
At the end of January the company announced the closure of 14 stores nationally, which meets with its 2016 programme of repositioning around 25% of the company’s Clothing & Home space. This forms part of the company’s cost saving strategy which also includes the reduction in the pace of openings for its Simply Food stores.
Not only does the company need to continue with constructively cutting costs, but it also needs to demonstrate how it is innovating within Clothing & Home and Simply Food in order for the company to remain relevant in an increasingly competitive marketplace. Marks & Spencer has a reputation for delivering good quality products, however ensuring that these products reach consumers in as efficient manner as possible will define how the company succeeds in the future.
Marks & Spencer will update the market with full year results at the end of March.