M&S eyes up Brits’ weekly shops as food arm set to expand
Marks & Spencer has not been shy over its ambition to conquer the British weekly shop, and the retail giant is nearing a crucial update on its foray into the UK’s fiercely competitive grocery market.
M&S Food accounts for more than half (54 per cent) of the retailer’s revenues, and its recent warehouse expansions suggest the FTSE 100 retailer is hungry for a piece of the UK’s supermarket pie.
The firm will announce its full-year results on Wednesday, and hopes its food expansion will help it regain a narrative that had been dominated by the cyber attack that sent it reeling last year.
On Monday, M&S splashed £66m on a 437,000 sq ft warehouse from online retailer Asos and later in the week announced it has started building a new £340m food distribution centre in Northamptonshire.
The new warehouse – M&S’ biggest ever investment into its food arm – was described by food logistics chief Kevin Bennett as the company’s “major step in transforming [it] into a true destination for the weekly shop”.
M&S hails record grocery share
The retailer has recently piled investment into revamping its stores and says this is pulling in more shoppers.
Sales in the firm’s food business jumped 5.6 per cent year on year according to M&S’ Christmas trading update, as the retailer toasted its biggest-ever grocery market share – up to four per cent in November.
This suggests M&S Food is muscling in on its up-market rival Waitrose – which holds a 4.6 per cent market share – but remains leagues behind sector giants Tesco and Sainsbury’s.
But the UK’s supermarkets have been battling to keep prices down in the face of looming food inflation caused by the Iran war – which a key industry body warns could reach double figures this year.
Tesco and Sainsbury’s have both refused to put a number on likely price rises in a bid to avoid spooking customers, but have called on the government to cut grocers’ energy bills.
M&S will also hope that its flourishing food business bears few scars from the devastating cyber attack that hit the retailer in April last year.
The attack revealed the fragilities in the company’s supply chains as it left some shelves empty and forced its website into a 12-week blackout.
It was “not an overstatement to describe [the attack] as traumatic,” M&S chairman Archie Norman said in July, telling MPs it felt like hackers were “trying to destroy” his business.
M&S hopes to forget ‘traumatic’ cyber attack
M&S managed to recover only a third of its £300m lost sales through insurance, and saw the hit to trading profit surge to £324m in the first half of that year alone.
But chief executive Stuart Machin has since sought to apply his blunt, hands-on approach to the retailer’s turnaround – a strategy he describes as “positive dissatisfaction”.
In recent months, M&S’ retail director Thinus Keeve has led – at times scathing – calls for the government and the Mayor of London to crack down on violent shoplifting, which he dubbed a “systemic issue”.
Richard Hunter, head analyst at Interactive Investor, said: “M&S will be glad to see the end of a year where the cyber disruption was the unfortunate highlight.
“Even so, the group’s healthy financial position helped it to weather the storm, and indeed M&S continued to make investments in the business despite the cyber-related costs elsewhere.”
The retailer’s share price has been on a wild ride in recent months, surging to a recent high just before the Iran war broke out, before sliding back towards its cyber attack lows.
The stock has fallen by around three per cent in recent days, to 317p, and stands 11 per cent lower than at this time last year.
If M&S is to win over investors, it will need to meet consensus forecasts of £16.4bn total sales and a £603m pre-tax profit.