Opinion: M&S capital markets briefing – action, not words, will matter

While the circumstances of the pair’s investor sessions are very different, it will likely be the similarities in their presentations that dictate the reaction.

Sainsbury’s meeting this week came after what the grocer dreamed would be a transformational moment, a merger with Asda, evaporated when the competition authorities gave the deal a thumbs-down.

Where next was the question, as JS reached what seemed like an existential fork in the road.

M&S, meanwhile, seems to have taken one step forward and two back, year after year.

The bellwether retailer’s ejection from the blue-chip FTSE 100 index, once unimaginable, was a landmark moment. But while it was dreadful news, everybody was prepared for it.

After the scale if its Asda disappointment, the temptation for Sainsbury’s would have been to unveil a new, equally ‘transformational’ vision. The grocer rightly did no such thing.

What was striking about Sainsbury’s briefing was the focus on making the most of what it already has, sweating its assets through a mixture of cost efficiencies and – most importantly – improved execution.

It was able to demonstrate that through improvements to its core proposition, whether by cutting switching rates to the discounters or improving price and quality, it had lots of levers to pull. The City liked the update and Sainsbury’s shares ticked up.

Opportunity

A similar executional emphasis is likely to be, and should be, the message from M&S on Tuesday – a laser-like focus on restoring the qualities that made it great.

That seems to be what’s on the cards. M&S’ house broker, Shore Capital, said this week in a no doubt well-informed note: “We believe that the capital markets morning is an opportunity for M&S to engage with the market more in a doing rather than analysing and transformation planning mode, something we sense that investors will welcome.”

M&S is making some progress, certainly in its food business under the energetic leadership of Stuart Machin. New formats, such as at Hempstead Valley in Kent, do a much better job of showing off M&S’ range and provenance credentials.

And the value message is coming across. The retailer has moved away from not including prices on adverts – a weird approach, which would have prompted the thought ‘if you have to ask the price, you can’t afford it’ among many potential shoppers.

Challenge

The big problem remains clothing, core to M&S’ proposition but which has languished under a succession of bosses.

M&S chief executive Steve Rowe has once again had to take direct control of apparel following the departure of Jill McDonald in July.

Recent hires to the fashion arm will, once again, raise hopes of renewed success – although the fact that has evaded so many otherwise successful clothing retail specialists is evidence of the scale of the challenge. Any evidence of better execution leading to better sales will be welcome.

Perversely, M&S’ demotion from the FTSE 100 may give Rowe and Archie Norman some breathing space.

While the exit was humiliating, it’s now over and done with. The possibility of it happening no longer dominates headlines and potentially creates space for the M&S team to focus on the business and escape the prism of share prices which shapes sentiment in the City but can bear little relationship to what shoppers think.

The battle to revive M&S will though be won or lost on what shoppers think, leading to what they buy.

Norman - who this week bought £100,000 of M&S shares - has been in similar situations before during his various corporate rescue missions. He said earlier this year: “When I went to ITV we dropped out of the FTSE 100, the sky didn’t fall in. The business was the same business the day after.”

The same is true of M&S. The point now is not that it has fallen out of the FTSE 100, but how it might get back in.

And that will be all about execution. Evidence of “doing”, to use Shore Capital’s word, is what will make the difference at M&S, as at Sainsbury’s.