Employees at Marks & Spencer will benefit from huge payouts worth thousands of pounds under its share savings scheme, as the stalwart retailer reaps the benefits of its turnaround plan and toasts its ‘best Christmas ever’.
The FTSE 100 retailer said more than 9,200 employees – most of them customer service representatives – who put an average of £150 a month into its 2020 share savings scheme would gain more than £10,000 when it is paid out on February 1.
The announcement was accompanied by a Christmas trading update that revealed a better-than-expected performance as shoppers turned to M&S for groceries and clothes.
Total like-for-like sales at the retailer rose by a record 8.1 percent in the thirteen weeks to December 30, compared to the same period in 2022. It marked the eleventh consecutive quarter of sales growth at M&S. Food sales rose by a record 9.9 percent in the thirteen weeks, exceeding market expectations, as consumers increasingly used M&S for “a greater proportion of their entire store”.
Stuart Machin, the company’s chief executive, said there had been double-digit growth in sales of salads, fruit and vegetables compared to last Christmas: “We’ve never used to be known for our core messages, but in reality our turnover in groceries. 24 percent compared to last year and the core items of our household were more than 30 percent higher than last year. Our food company becomes a different food company. It’s not just for Christmas.”
He said M&S had taken market share from “some of the competition”, including Waitrose, its biggest rival, adding that “we think we can take share from the market as a whole”. M&S and Waitrose each had a 3.8 percent share of the supermarket market in the 12 weeks to December 30, according to market researcher Nielsen IQ. That was an improvement for M&S from a year earlier, when its market share was 3.7 percent, while Waitrose’s share fell from 3.9 percent.
Demand for new Christmas products was strong and increased by 14 percent compared to the previous year. 725,000 ‘snow night projector cans’ and 723,000 shortbread light cans were sold. Record sales of cranberry sauce and “Christmas creams” also contributed to the overall growth.
Sales in the clothing and home activities increased by 4.8 percent, exceeding expectations of an increase of 2.8 percent. Sales of women’s clothing were especially strong as the company improved its style credentials. The retailer sold more than 150,000 sequin products. Bestsellers included the £29.50 black sequin jumper, which sold 23,000, and the £55 sequin elastic waist trousers, which sold 19,000.
Machin, 53, said the growth in apparel was partly the result of offering fewer discounts. “We didn’t want to give discounts because our goal is not to increase prices,” he said. “We wanted to hold on to our affordable prices. What we do is make sure we get the price right the first time, so it’s a very different strategy [from other retailers].”
The strong Christmas trading update marks the latest sign of the turnaround taking place under Machin, Katie Bickerstaffe, 56, his co-chief executive, and Archie Norman, 69, the chairman. M&S, which has more than a thousand stores in Britain, made a dramatic return to the FTSE 100 share index last summer after four years. The 140-year-old retailer, a founding member of the index of British listed companies, was downgraded to the mid-cap FTSE 250 in 2019 after coming under pressure from online competition and amid stagnant growth of his shopping activities.
Its directors have tried to build a more resilient company after decades of false dawns and several iterations of a “fix the basics” strategy. They have focused on the quality and value of the clothing and food, investing heavily in technology and e-commerce and closing dozens of larger stores while refurbishing others.
The rebound has been most dramatic in the apparel sector, which has often been a source of distress for retailers. The fashion team, made up of Maddy Evans, the womenswear director, and Richard Price, the clothing and home director, are being celebrated for bringing the British institution back to life.
Machin said more needs to be done to revive the business, including at Ocado Retail, the joint venture with Ocado Group, which has struggled to maintain momentum since the online boom during the pandemic.
The M&S boss said the company had “doubled down and supported the Ocado reset” with Hannah Gibson, the chief executive of Ocado Retail. He said 90 per cent of the M&S range is now on the Ocado platform and the partnership was “very strong”, but declined to comment on whether the joint venture’s latest £190.7m installment , which was due in August this year, would be paid. . Ocado Group will issue its own Christmas trading update next week.
Machin sounded a warning about economic uncertainty and higher costs due to higher wages and business rates. When asked if the retailer was being overly cautious, he said it was better to “be cautious and not over-promise.” M&S has a history of overpromising and underdelivering, and subsequently of inconsistency.”
He said deliveries of his products could be delayed if disruption to shipping in the Red Sea continued. “We are aware of the costs and, more importantly, the availability of new ranges,” he said. “We haven’t experienced that yet, but we might expect some minor delays in the newness in February and March. That is really clothing and home and we do not expect our food sector to be affected.”
He said the group had entered 2024 “with a spring in our step” and was confident that results for the year would be “in line with market expectations”. Analysts expect full-year pre-tax profits of £667m, up from £482.0m last year and £522.9m the year before.
Shares in M&S, which have risen around 80 per cent in the past year, fell 14½p, or 5.2 per cent, to 263¼p, a decline attributed by some analysts to investors’ profit-taking and by others to cautious prospects of Company.
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