Innovation as well as cost-cutting needed at Marks and Spencer
PUBLISHED: 14:34 20 March 2018 | UPDATED: 14:34 20 March 2018
Jason Butler of NW Brown shares his thoughts on Marks and Spencer’s latest set of results.
The high street continues to evolve and is going through a period of serious upheaval so this week I am looking at Marks and Spencer.
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 third quarter earnings in early January, which included its Christmas trading statement.
Sales at the company’s Simply Food business, previously viewed as one of the strongest growing divisions, underperformed. This was particularly disappointing versus its food peers who reported strong Christmas figures.
At the end of January the company announced 14 store closures nationally, in line with its 2016 programme of repositioning around 25% of its clothing and home space.
Not only does the company need to continue constructively cutting costs, but it also needs to demonstrate how it is innovating in order to remain relevant in an increasingly competitive marketplace.
Marks and Spencer has a reputation for delivering good quality products, however ensuring these products reach consumers in as efficient manner as possible will define how the company succeeds in the future.