‘Transformation is hard work but M&S’ impressive turnaround is demonstrating the rewards of this effort’

According to CEO Stuart Machin, M&S is in its best financial health for 30 years, with profit before tax soaring by 41%, food sales up 13% and clothing and home up 5.3% last year.

What does it take to turn an ailing heritage brand around on the scale that M&S has done to date? We examine some of the key differentiators that have led to growth.

Back-to-basics strategy

Having a clear vision and purpose are central to successful transformation. Machin translated this succinctly in the latest results presentations, saying: “We are becoming more relevant, to more people, more of the time”.

After M&S posted its 10th consecutive year of declining fashion sales in 2020, it was clear that if the company was to survive and thrive into the future, then it drastically needed to step up transformation efforts. And there have been some bold moves to date.

At the heart of the M&S transformation programme has been a back-to-basics exercise, putting the quality and value on which the company was founded firmly back at the heart of the business.

This success can be seen as M&S has built on its food strengths with new store formats and ongoing innovation in its ranges and value proposition. In clothing and home, the company has been methodically rethinking each category with a focus on simplicity and style.

By offering fewer items, but in higher volumes, the company has reduced overheads and brought a better customer experience to its now less-cluttered stores.

This clarity of purpose is at the heart of M&S’s turnaround and every retailer on the high street and online should be clear on the purpose of its business and let go of the things that cease to add value.

Rethinking stores wins customers

Drastic change often divides opinion and that has certainly been the case for M&S. The fact that the company is quite literally pushing to demolish its Marble Arch flagship in order to rebuild is symbolic of the change mentality at the helm of the business.

The closure of older, full-range stores in UK high streets has led to upset and petitions from many of its customers. But, despite providing hubs within the community, the cold hard fact of the matter is that older stores could neither be run efficiently nor showcase M&S at its best. This is why many have faced the axe.

M&S’s newer food stores are bright and airy places to shop, cheaper to run and attract family shoppers with bigger baskets, as evidenced by the 12% uplift at Leeds White Rose and 8% rise at Liverpool One.

A new breed of shopper is now coming into store but online the retailer is doing even better at attracting new customers, thanks to the opening up of its website to brand partnerships with third-party brand sales up 33% last year.

Much like when Amazon introduced its marketplace, this change is the result of new, innovative ways of thinking within the company. For M&S, this initially required the setting up of a separate MS2 division tasked to “think like a startup” across its clothing and home and online and data functions, and generating new ideas that have been integrated back into its business.

Innovating operational efficiency

A structurally lower cost base, with accelerating store rotation and modernised supply chains, has been at the heart of success for the retailer.

The acquisition of its logistics supplier Gist has allowed M&S to take control of its supply chain with better forecasting, ordering and allocation. It has facilitated improved in-store processes and the increased visibility of stock holding has led to better operational efficiency.

Its 50% stake in Ocado Retail since 2020 has given the retailer a shoo-in to full-line online grocery and access to a broader audience, although there remain further changes and efficiencies to be made to improve profitability.

Ongoing product and range innovation remains a focus right across the business. In its latest results, the group pointed to the strong beauty sales mix growth in its relocated stores; uplifts in women’s denim and trousers, knitwear and lingerie; and improved quality driving its top-tier Autograph sales for men.

In food, the company has invested in price and dine-in sales, while focusing recent innovation on the rollout of new Eat Well products to respond to customer demand for high protein and gut health support.

In terms of making change successful, the company has focused on hiring the right people to facilitate the change required and has not held back from investment in staffing or technology. This year, M&S will increase investment in core technology infrastructure, including an upgrade in SAP.

Executing at the level of details

When it comes to making improvements, small details matter and these are the things that customers notice. Machin’s mantra of always being “positively dissatisfied” is opening up the entire business to seek out the small improvements that add up to excellence in execution.

For example, from a personal perspective, new items in the Eat Well range have increased my visits to the foodhall, and in clothing I have been drawn to purchase items several times after receiving timely email notifications alerting me when products I was interested in were back in stock. This is a level of great customer service not offered by many other retailers.

In its results presentation, M&S talks about creating a “high-performance culture” with leadership “sleeves rolled up, and in the detail”. This will remain critical to its ongoing success.

It is also telling that despite the healthy balance sheet, M&S is planning to increase its cost savings this year to fund further investment into pricing and product innovation.

The ongoing transformation of M&S forms a blueprint for change within the industry. There is more work to do, and the company will need to continue to keep up with the pace of shifting consumer demands – but it has been a Remarksable transformation to date.