Marks & Spencer is set to give a big update
Marks & Spencer has made no secret of its determination to dominate the British weekly shop and the high street giant is approaching a pivotal update on its push into the UK’s intensely competitive grocery sector. M&S Food represents more than half (54 per cent) of the retailer’s turnover, and its recent warehouse investments indicate the FTSE 100 company is eager to claim a larger slice of the UK’s supermarket market.
The business will unveil its full-year results on Wednesday, hoping its food expansion will help it reclaim a story that had been overshadowed by last year’s cyber attack which left it reeling. On Monday, M&S spent £66m acquiring a 437,000 sq ft warehouse from online retailer Asos, and later in the week revealed it has begun construction on a new £340m food distribution centre in Northamptonshire.
The new facility – M&S’ largest-ever investment in its food division – 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”, as reported by City AM.
M&S celebrates record grocery share
The retailer has recently channelled significant investment into refurbishing its stores and claims this is attracting more customers. Turnover in the firm’s food division rose 5.6 per cent year on year according to M&S’ Christmas trading update, as the retailer celebrated its highest-ever grocery market share – reaching four per cent in November. This indicates M&S Food is encroaching on the territory of its upmarket competitor Waitrose – which commands a 4.6 per cent market share – though it still trails considerably behind industry leaders Tesco and Sainsbury’s.
However, Britain’s supermarkets have been fighting to maintain affordable prices amid impending food inflation triggered by the Iran war – which a leading industry body cautions could hit double digits this year. Both Tesco and Sainsbury’s have declined to specify anticipated price increases in an effort to prevent alarming shoppers, but have urged the government to reduce energy costs for grocers.
M&S will also be hoping that its thriving food division emerges relatively unscathed from the catastrophic cyber attack that struck the retailer in April last year. The attack exposed vulnerabilities in the company’s supply chains, leaving some shelves bare and forcing its website offline for 12 weeks.
It was “not an overstatement to describe [the attack] as traumatic,” M&S chairman Archie Norman told MPs in July, saying it felt like hackers were “trying to destroy” his business.
M&S hopes to move past ‘traumatic’ cyber attack
M&S was able to recoup only a third of its £300m lost sales through insurance, with the impact on trading profit soaring to £324m in the first half of that year alone. Yet chief executive Stuart Machin has since attempted to implement his direct, practical approach to the retailer’s transformation – a philosophy he terms “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 experienced significant volatility in recent months, climbing to a recent peak just before the Iran conflict erupted, before retreating towards the lows seen during its cyber attack.
The stock has dropped by approximately three per cent in recent days, to 317p, and sits 11 per cent below its level at this point last year. To regain investor confidence, M&S will need to deliver on consensus predictions of £16.4bn in total sales and a £603m pre-tax profit.
