Despite falling profits in 2022/23, stock outlook has soared in the past week for Marks and Spencer, which notably has been bolstered by the rejuvenation of M&S Food.
Sales from its Food division jumped 8.7%, including a 5% rise in its “core categories” that eclipsed pre-pandemic levels. Its market share, in fact, increased by 3.6% to top all large supermarket chains in the 52 weeks ending in mid-March, according to data from Kantar Worldpanel. Shares were up 13% at one point last week.
It has been quite a comeback story for the embattled retailer, driven by Food, Clothing and Home.
“One year in, our strategy to reshape M&S for growth has driven sustained trading momentum, with both businesses continuing to grow sales and market share,” CEO Stuart Machin said in a statement. “Our Food and Clothing & Home businesses invested in value to protect customers from the full force of inflation which, whilst impacting margin, was the right thing to do, as serving our customers well is the only route to delivering for our shareholders.”
Machin said that the turnaround in Food, with customer perception rising to its highest levels since 2017, has been led by M&S’ commitment not only to quality but also to value. Instead of “passing on the cost of inflation” to consumers, M&S opted to lower price points with help from the acquisition of Gist. That included its Remarksable lines and locked-in prices on family favourites – clearly a nod to compete with deep discounters such as Aldi and Lidl. As a result, the Remarksable products saw a 40% increase, with one fifth of consumers putting them in their baskets.
One of the key drivers, however, was fresh food, which saw tremendous interest especially during seasonal events such as Christmas, Easter and Mother’s Day.
M&S says it hopes to see a further 1% growth in Food over the next five years. How will it achieve that?
“This will be delivered through ‘protecting the M&S magic’ of trusted value and innovation in fresh, easy-to-cook food, while fixing the backbone processes of the supply chain and driving growth in the store estate,” the company said. Innovation will be one of the keys to that potential in coming years.
Despite the positive news, M&S is still struggling to regain the footing that made it a retail powerhouse even as recently as a decade ago. Profits are likely to fall again this year. And it hasn’t been helped by the pandemic or the current economic crisis, though it is showing signs of stability.
“While the economic outlook for consumer spending is uncertain, cost inflation remains high, and market conditions are expected to become more challenging, the strategy is beginning to deliver improved performance and there remains much within the group’s control,” M&S said.
