M&S boss Stuart Machin on ‘tricksy’ members’ prices and new beginnings for the retail giant

Sales and profits rose at Marks & Spencer’s food and clothing divisions, which both achieved volume and value share growth as the retailer executes the strategy set out two years ago.

Chief executive Stuart Machin maintains: “We have a clear vision for the future and there is so much opportunity ahead. We are at the beginnings of a new M&S.”

No ‘tricksy’ pricing – Sparks members’ prices ruled out

Retailers such as Sainsbury’s and Tesco have led a charge into membership pricing, which rewards loyal shoppers with lower prices and provides a valuable source of customer data. It has proved controversial and the Competition and Markets Authority is undertaking a review of loyalty pricing.

Marks & Spencer will not be following in others’ footsteps with its Sparks loyalty programme. Machin definitively ruled out Sparks members’ prices.

His aim is for M&S to be “the most trusted” retailer. Machin pointed to the success of the Remarksable Value and other prices “dropped and locked” that give customers confidence in price integrity.

He says: “At M&S, we don’t do tricksy pricing so we won’t be doing Sparks prices, but we do want to offer the best prices for the best product every day.

“The reason I say tricksy is we don’t think that giving customers who are just on Sparks special prices, and not giving those to everyone, is being a trusted retailer. Our trusted value strategy is first price, right price.”

But he intends to make the Sparks scheme work better. He said: “What we do need to do on Sparks is rethink what Sparks means for M&S and our customers. We’re working on a plan now. We want it to be highly personalised but we don’t want it to be about ‘get a special deal, just for that day’.

“I’m not over-paranoid about loyalty. I’m paranoid that we can get customers in our ecosystem and find a way of giving them better service.”

More details are likely at M&S’ forthcoming capital markets day.

Consumer sentiment improving

M&S’ results coincided with the news that UK inflation fell to its lowest level in three years in April.

That will be welcome for consumers who have borne the weight of the cost-of-living crisis and for retailers that have suffered as customers’ spending power waned.

Machin is encouraged by M&S customer research that showed improving sentiment but believes value for money appeal will remain key.

The retailer’s latest Family Matters Index, which surveys 5,000 people and for which research was conducted in March, showed optimism at its highest for three years.

Machin says: “They are definitely feeling more positive about costs. I think the inflation numbers that just came out give people some reassurance. People are focused on mortgage rates, political uncertainty… but they are still very much focused on value. That comes out as one of the biggest metrics in all the data we see.”

Culture shift – ‘sleeves rolled up’

While emphasis on retail disciplines such as product, quality and value are driving the resurgence of M&S, attention has been paid too to more intangible aspects such as culture.

Machin terms it “the soft wiring of the organisation – who we are and how we show up” and sees cultural shift at the retailer as “critically important”.

He says: “We are building a culture where everyone is sleeves rolled up, M&S first, closer to customers and closer to colleagues.”

The retailer made its “biggest ever investment” in frontline pay of £89m this year – something Machin describes as a “good cost” – but changing engrained behaviour across the business is also being driven.

Head office and other support staff, for instance, are now required to spend seven days a year working in the shops as part of their performance objectives.

The retailer has also set out behavioural targets. It aims to move away from how people sometimes behave at present, such as accepting average performance or being too inward-looking, to others such as aiming high and being close to customers and colleagues.

Execution, execution, execution

A focus on the strengths of M&S’ food arm has been maintained, while in clothing and home, a new trading model is bearing fruit.

In food, M&S launched 1,300 new lines last year, when it also benefited from store renewals that cater better to family shoppers. Perceptions of quality and value also increased.

In clothing, changes have included reducing the number of options available by a “double-digit” percentage since 2019, and devoting attention to growing lines that generate sales of more than £1m by “buying deeper and bolder”.

Improved stores have been key. M&S has been shifting into “bigger, better” shops with its renewal programme.

Store relocations so far have drawn in new customers and achieved sales uplifts of approximately 50%.

Since 2019, M&S has spent £100m to open 12 new full-line stores, which are expected to deliver pay back within two years.

Machin says there is still work to do to make the most of online opportunities. Online delivered 7.8% sales growth last year but he wants to do more to improve the app experience, fulfilment and make changes to systems to support growth.

Smooth operator

The customer experience delivered in the shops or online relies on the capabilities of the systems behind it and efficient practices, which is also an ongoing preoccupation for M&S.

Having made structural cost savings of £180m last year, M&S has upped its five-year savings target from £400m to £500m.

Savings have come through longer-term supplier commitments and joint efficiency initiatives, which allowed cost of goods savings. The acquisition of Gist brought higher than expected food logistics savings – M&S admitted that “despite this, the network is old and a high cost to serve”.

M&S was also able to make savings through initiatives such as the development of hub stores for returns consolidation. In clothing, M&S’ stock cover has been reduced to about 12 weeks compared with 18 weeks in 2018/19.

More to come

As far as Machin is concerned, changes made and in progress show “the beginnings of a new M&S” and he sees the retailer as a growth business as it presses on with improvements.

Customers – and M&S is attracting more, up over a million last year – should see more of what they like.

Machin says this will be “an exciting year when it comes to product innovation”. There will be relaunches such as in the gastro food category, while “we have some very exciting collaborations coming up on womenswear”.

“I think we’re in a good place,” he concludes. M&S’ shares were up almost 6% at the time of writing, so it seems that investors too are confident in the retailer’s direction of travel.