Marks and Spencer is putting its reputation as a top quality brand on the line, according to the boss of a major retail consultancy. John Ibbotson, director at Retail Vision says that the company “risks sowing the seeds of destruction” if it keeps up its current strategy.
Ibbotson made the comments as M&S reported its half year results on Wednesday. On the surface, things look pretty good. Total revenues are up 1%, underlying operating profits have grown by 6.1%, and the company has increased its dividend.
Look past these figures though, and M&S’s new strategy isn’t working. The company is focusing on cutting costs to improve profitability in its clothing business, and while gross margins increased by 0.85%, like-for-like sales in the general merchandise area of the business — which includes clothing and homewares — fell 1.2% in the six months up to September.
Marks and Spencer put the fall in clothing sales down to not discounting merchandise at the end of the summer, something that many other retailers did to shift excess stock left over thanks to a cool, wet summer.
“Seeds of destruction”
Some are warning that chief executive Marc Bolland’s increased focus on gross margin and profitability could put M&S’s position as one of the UK’s most respected retailers at risk.
John Ibbotson believes that M&S’s lolyal customer base is on the line if it keeps up with its current strategy “For a brand that owes its totemic position among the middle classes to a hard-earned reputation for quality, shaving quality in the name of cost-cutting risks sowing the seeds of destruction” he said.
“All vagaries of fashion aside, one of the key reasons for M&S’s 130 years of survival is its consistent quality. To put this formula at risk in an attempt to keep up with fast-growing rivals like Next borders on folly, and it’s no wonder the brand’s head of clothing John Dixon jumped ship this year.”
Dixon quit in July after reportedly losing faith in the company’s management, having spent 26 years with M&S.
Ibbotson added “Marc Bolland is inevitably trumpeting the increase in profits and the controlling of costs. But this can’t mask the disappointing 1.2% fall in like-for-like non-food sales. There is no hiding the fact that M&S is losing the clothing battle”
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