M&S recovery bucks the UK High St trend

M&S’s recent half-year results reported a 17.2 rise in pre-tax profits, to £407.8 million. Reuters

It's been a tough 12 months in traditional UK retail. Shops are closing, chains are pulling back, staff are losing their jobs. A combination of economic headwinds accompanied by punishing business rates and taxes, globalisation, not to mention suffocating red tape, are making life for many High Street operators increasingly difficult, if not impossible.

Amid the gloom there is one bright, shining star. M&S is dramatic proof that not all is lost – and provides startling evidence that recovery is possible.

M&S’s recent half-year results reported a 17.2 rise in pre-tax profits, to £407.8 million. Sales climbed 5.8 per cent to £6.52 billion. Food sales jumped 8.1 per cent and operating profit in the division climbed by 34.5 per cent to £213.1 million. M&S’s clothing and home sales increased 4.7 per cent and profits were higher at £242.2 million.

Separately, data from market analysts revealed M&S enjoying stronger growth in groceries than any other supermarket. Kantar’s research disclosed M&S recording the highest sales increase among the grocers, with a year-on-year surge of 11 per cent. Fellow middle-market operator, Waitrose, saw a 1 per cent increase, ahead of Asda and the Co-op.

For anyone who has followed the fortunes of M&S over the past decades this is a remarkable, scarcely believable, transformation. Time was when the chain was the heavyweight for others to aspire to, the undisputed champion and bellwether for the state of Britain’s High Street. Then, a long decline followed.

Chairmen and chief executives came and went, changes of direction were attempted and failed. Customers, suppliers, investors were despairing. M&S clothes became the subject of ridicule, the label a byword for tired and frumpy. The firm was constantly beset with stock issues so that shoppers complained of having piles of shirts, say, in one size but crucially not in theirs.

The group went from being best in class to a laughing stock. Branches were closed and there was a sense of no way back. Today, that outlook is overturned. Far from dead and buried, M&S is very much alive and thriving, and it’s showing that with the right management and formula, “legacy” retailers can have a promising future.

For that, M&S and its chairman Archie Norman deserve this year’s business accolades. No question.

The turnaround can be dated to Norman’s arrival in 2017. The genius behind the ascent of Asda, Norman’s return to a sector he once bestrode marked the beginning of the fightback. At Asda – today struggling dreadfully but hopeful with a new chief, Allan Leighton, himself a Norman disciple from the Asda days – Norman displayed an extraordinary ability to motivate, recruit well and rather than presume, to listen to and trust consumers on they actually wanted.

That was replicated at M&S. Norman’s eye for detail saw everything move up several gears. Stores received brighter decor, lighting and signage. Their layouts became sleeker and no longer sprawling.

His direct and dynamic management style was a breath of fresh air in an organisation that had come to resemble a branch of the civil service, with layers of stifling bureaucracy, stuck in its ways, forever harking back to a glorious past with no obvious route forward.

Board meetings, which used to be ponderous affairs, were over quickly, with directors standing up to save time. Norman gave strong support to chief executive Steve Rowe and then to his successor, Stuart Machin. A key appointment as well was Richard Price, in charge of clothing and home.

Rowe, followed by Machin, embodied a different, fresher M&S. With Norman’s encouragement, a switch was flicked. Instead of cutting costs and penny pinching, M&S invested out of trouble. “If in doubt, add quality” was the mantra.

In fashion, Price was given what many thought was a hospital pass – to make women, and men, but mostly women, choose M&S. There was a third, critical job hire, also in fashion: the recruiting of Maddy Evans from Topshop. Evans was initially given the buying brief, today she runs womenswear.

Evans joined just when profits had fallen 17 per cent and the once mighty M&S suffered the ignominy of being demoted from the FTSE100. Friends, family and business contacts would ask her: “Can you just make it work? Can you make product that I want to wear?” As Norman said when he took over: “The M&S core customer was seen as someone who no longer wanted to look stylish.”

Evans made it her first task to figure out who the M&S customer was – who it ought to be. She defined this ideal as the “modern mainstream”. It was a woman “who is not at the bleeding edge of fashion, but does she want to be considered modern? Yes. Does she feel like she’s relevant in terms of what she’s got on and what her friends might be wearing as well? And does the product need to give her confidence and feel stylish? Absolutely”.

Uniquely today, that approach finds M&S appealing to both mothers and their Gen Z daughters. Evans, put simply, is giving the different age bands what they desire: great looking, on-trend (often in collaboration with designers and celebrities), easy-to-care-for clothes at the right price.

Norman broke down internal structural barriers. Previously, M&S was run as two distinct businesses: fashion and food. They would coexist inside the same premises, but appeal to different audiences.

Those buying the clothes were older and tended to be less affluent than those at the food counters. He brought them together, so younger people with money were drawn to M&S clothing as well as food.

While other chains moved to out-of-town centres with free parking, M&S was hamstrung by its estate of in-town, smaller stores. Norman was tough, ignoring howls of protest from locals, and shut underperforming branches in favour of new, bigger, purpose-built locations affording easy access and car parks, alongside other family-oriented brands on the same site. Now, 18 out of M&S’s top 20 shops are in retail parks.

M&S finally got online to work. It’s not perfect – the partnership with Ocado has issues but it is getting there. Gone too, thanks to a boosted IT and logistics operation, are the perennial M&S travails of overstocking some products and understocking others.

Timing has helped. As many of its peers, among them Debenhams, BHS, Littlewoods, Arcadia, Asda and Waitrose, have suffered and, in some cases, vanished, M&S has raised its game, boldly and unapologetically stepping on to their ground. Some may argue their plight is the reason for M&S’s success, but M&S was itself in great danger of heading for oblivion. The fact that has not happened and the reverse has occurred is down to Norman and the senior team.

Their achievement is extraordinary. M&S really was that apocryphal supertanker. Norman wrested the controls and turned it around.

Machin hails “the beginning of a new M&S”. It certainly feels like that. The old, with its baggage of historical success and then problems galore, appears well and truly discarded.

It’s still a difficult challenge. Retailing is a fickle business and the reborn M&S must continue giving customers what they desire. Having got this far, M&S must not let go. Asda and that firm’s woes, post-Norman, afford a stark reminder of how fortunes can turn.