What the analysts are saying about the M&S results: 'Seismic change' needed after 'humiliating' plans unveiled

 
Caitlin Morrison
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Marks And Spencer Expected To Re-structure Their Core Business
M&S has been struggling for a while now and analysts believe it could be in terminal decline (Source: Getty)

Retail experts have blasted Marks & Spencer's plans for a turnaround - even taking a swipe at the firm's recent collaboration with Alexa Chung - and warned that without "seismic change", the group risks continuing its "terminal decline" to its inevitable conclusion.

Marks revealed a massive drop in profits this morning, and outlined plans to close 60 UK stores, as well as exiting international markets.

The retailer's profit dropped by a whopping 88 per cent in the first half, with the group providing the by-now familiar explanation that the clothing & home division pulled down the rest of the business. The company said it would seek to remedy this longstanding problem by reducing its full line stores and focusing more on M&S Simply Food outlets - however, some analysts believe more drastic action is needed.

Seismic change

"If Marks & Spencer are not on the cusp of a seismic change in business strategy, we think they should be," said Phil Dorrell, partner at consultancy group Retail Remedy.

"Marks & Spencer have been trying to dig their general merchandise business out of trouble for several years but for now it seems that the time has come to stop digging."

Dorrell sait that by closing stores and cutting jobs without an accompanying announcement on a new strategy, "it feels like... M&S are giving in. Or rather, they are still digging, but this time a trench to retreat in to".

"Reducing cost will take the pressure off the profit performance but this will only be short term, and will not save themselves rich," he added.

"We would like to see a new face at M&S, one that is new to the business not just the boardroom, to identify the customer that they want, not the customer that they have. She is confident in her style, something that M&S should learn from, and yes she is an existing customer already only she currently walks past the clothing rails in search of food."

Clutching at straws

Toby Southgate, chief exec at Brand Union, said M&S' recent tie-up with Alexa Chung "felt a little like the retailer was clutching at straws, grasping at an elusive younger audience".

"Whacking together a range ‘designed’ by Alexa Chung is one thing, creating sustainable and meaningful experiences that build loyalty and support from a new base of consumers is another," he said.


Alexa Chung has paired up with M&S

"I have a lot of heart for Marks and Sparks. I just wish it had moved faster, and sooner, rather than waiting for poor profit results to make much needed decisions," Southgate added.

"I understand the focus on food to drive appeal and sales to the solidly middle class in neat suburban towns, that’s marvellous…but don’t those shoppers already use Ocado?

"One analyst has described Mark and Spencer’s decisions as “medium radical”. I would argue the business needs more than that, and the iconic brand itself needs transformation to see success."

Humiliating withdrawal

“M&S’s humiliating withdrawal from 10 overseas markets is nothing less than a Dunkirk moment for an iconic British brand," said John Ibbotson, director at Retail Vision.

“When in July it posted its worst results for a decade, many thought things couldn’t get any worse for the venerable retailer. But they just have. And then some.

“The collapse in profits reveals both the systemic problems in the brand’s offering, and its abject failure to tackle them."

Ibbotson added: “Despite the consistent success of its food lines, clothing and general merchandise still accounts for half of M&S’s business – and its seemingly terminal decline has turned it into a giant, profit-sapping albatross around Steve Rowe’s neck."

A bold step

"M&S is cutting its cloth to meet the changing shopping habits of its customers. The retailer is shifting away from clothes towards food, focusing on the bit of the business which has been most successful in recent times," said Hargreaves Lansdown senior analyst Laith Khalaf.

"This is Steve Rowe’s first big step as M&S boss since taking up the role six months ago, and it looks like a bold one. It makes sense for the business to go to where the customers are by placing greater emphasis on food, though the sands shift pretty quickly in the retail business, and the best laid plans can go astray.

"The all-important Christmas trading period is just around the corner, though the changes announced today are more long term in nature, and will come with costs attached. It is still therefore a long road ahead for M&S, and it will take some time before we see if these changes revitalise the ailing retailer."

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