Marks & Spencer: great food, bad clothes

Sales are up, but clothing needs a rethink.

With total UK sales up by 2.6 per cent, the headline on today’s M&S results is that the company has delivered the strongest quarterly trading growth in two years. While this is true, such a statement belies a whole host of underlying issues; many of which are, as of yet, unresolved.

Despite the solid overall growth, there is a strong sense of déjà vu in the latest set of numbers: the polarised performance of falling clothing sales and rising food sales continues and seems to have become somewhat entrenched. Indeed, the polarisation is even sharper this quarter given the particularly robust uplift in food sales – an uplift which has saved M&S the embarrassment of a weaker set of trading results.

That this pattern has repeated itself over a relatively long period of time raises two critical questions: can the negative trend in clothing be reversed and, if so, what does M&S need to do to reverse it?

On the first point, it is almost impossible that M&S will ever go back to the pre-1998 heydays when its clothing market share was at its zenith. The market has changed too fundamentally since that time and the more fragmented landscape makes it impossible for a player of M&S’s configuration to take the share it once did. However, that does not mean to say that M&S’s market share could not be bigger and it certainly does not mean that M&S should accept recent declines in share as being inevitable. It has the potential to do much better; whether it has the will is another matter.

The fundamental problem with M&S is that it still thinks and behaves like a middle market clothing retailer of yesteryear. Many attempts have been made to shift this attitude and it would be unfair not to recognise that some progress has been made. However, old habits die hard and M&S’s middle market DNA still shows through in so many ways, especially on the product front.

There are two critical issues with product. The first is that there is a lack of targeting and empathy with core customers, which means that the offer is frequently not one that is seen as being "must have" – something that is now critical in clothing. The second problem relates to product merchandising. Although M&S’s newer stores are a significant improvement over what came before them, there is still a feel of drowning in a ‘sea of product’ which makes it hard for consumers to pick out key trends and styles. This method of merchandising continues to be out of step with the more segmented way in which many competitors present their offers and means that M&S often lacks the ‘"exclusivity" or "excitement" of rivals.

A further issue is M&S’s focus on the"value" part of its range, which we believe is too great and is an underlying symptom of a relatively weak offer and lack of confidence in clothing. While the market is undeniably more price sensitive, the key issue for consumers is value for money rather than just low prices. In the case of M&S, this is about adding value and interest to clothing ranges so that customers are willing to pay more. This, and not a focus on price, needs to be the direction of travel going forward.

With demand in a lacklustre state, the above would be enough of a problem if competition was static; however, other players have been aggressive both in expanding and in developing their ranges and propositions. In light of this, M&S seems to have been increasingly left behind. A prime example is John Lewis which has a strong customer overlap with M&S: the reinvigoration of its fashion offer might not have contributed much to M&S’s declining clothing share, but it – along with many other players – will have certainly nibbled away at it. Next has also improved its fashion credentials, as has Debenhams through its own brand offers; meanwhile, Primark continues to lead on price. Collectively, all of these players – and more – are putting the squeeze on M&S.

Interestingly, the food business provides a template for how M&S should approach clothing. Here M&S is unashamedly directional; it does not try to be all things to all men. The stance, while recognising the need to provide good value for money, is strongly skewed towards the premium end of the market. Brand segmentation is clear and innovation ensures that various parts of the range are regularly refreshed. All of this is supported by a marketing effort that creates customer interest and genuinely reflects the strengths of the proposition. All of these factors have contributed to an impressive market beating performance over the last quarter.

Overall, despite the lacklustre results, M&S remains a solid player and has significant potential. There are plans in place to remedy some of the issues inherent within the business, but the remainder of 2013 will need to be a year of delivery and action if the company is to turnaround its fortunes.

Photograph: Getty Images

 Managing Director of Conlumino

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Debunking Boris Johnson's claim that energy bills will be lower if we leave the EU

Why the Brexiteers' energy policy is less power to the people and more electric shock.

Boris Johnson and Michael Gove have promised that they will end VAT on domestic energy bills if the country votes to leave in the EU referendum. This would save Britain £2bn, or "over £60" per household, they claimed in The Sun this morning.

They are right that this is not something that could be done without leaving the Union. But is such a promise responsible? Might Brexit in fact cost us much more in increased energy bills than an end to VAT could ever hope to save? Quite probably.

Let’s do the maths...

In 2014, the latest year for which figures are available, the UK imported 46 per cent of our total energy supply. Over 20 other countries helped us keep our lights on, from Russian coal to Norwegian gas. And according to Energy Secretary Amber Rudd, this trend is only set to continue (regardless of the potential for domestic fracking), thanks to our declining reserves of North Sea gas and oil.


Click to enlarge.

The reliance on imports makes the UK highly vulnerable to fluctuations in the value of the pound: the lower its value, the more we have to pay for anything we import. This is a situation that could spell disaster in the case of a Brexit, with the Treasury estimating that a vote to leave could cause the pound to fall by 12 per cent.

So what does this mean for our energy bills? According to December’s figures from the Office of National Statistics, the average UK household spends £25.80 a week on gas, electricity and other fuels, which adds up to £35.7bn a year across the UK. And if roughly 45 per cent (£16.4bn) of that amount is based on imports, then a devaluation of the pound could cause their cost to rise 12 per cent – to £18.4bn.

This would represent a 5.6 per cent increase in our total spending on domestic energy, bringing the annual cost up to £37.7bn, and resulting in a £75 a year rise per average household. That’s £11 more than the Brexiteers have promised removing VAT would reduce bills by. 

This is a rough estimate – and adjustments would have to be made to account for the varying exchange rates of the countries we trade with, as well as the proportion of the energy imports that are allocated to domestic use – but it makes a start at holding Johnson and Gove’s latest figures to account.

Here are five other ways in which leaving the EU could risk soaring energy prices:

We would have less control over EU energy policy

A new report from Chatham House argues that the deeply integrated nature of the UK’s energy system means that we couldn’t simply switch-off the  relationship with the EU. “It would be neither possible nor desirable to ‘unplug’ the UK from Europe’s energy networks,” they argue. “A degree of continued adherence to EU market, environmental and governance rules would be inevitable.”

Exclusion from Europe’s Internal Energy Market could have a long-term negative impact

Secretary of State for Energy and Climate Change Amber Rudd said that a Brexit was likely to produce an “electric shock” for UK energy customers – with costs spiralling upwards “by at least half a billion pounds a year”. This claim was based on Vivid Economic’s report for the National Grid, which warned that if Britain was excluded from the IEM, the potential impact “could be up to £500m per year by the early 2020s”.

Brexit could make our energy supply less secure

Rudd has also stressed  the risks to energy security that a vote to Leave could entail. In a speech made last Thursday, she pointed her finger particularly in the direction of Vladamir Putin and his ability to bloc gas supplies to the UK: “As a bloc of 500 million people we have the power to force Putin’s hand. We can coordinate our response to a crisis.”

It could also choke investment into British energy infrastructure

£45bn was invested in Britain’s energy system from elsewhere in the EU in 2014. But the German industrial conglomerate Siemens, who makes hundreds of the turbines used the UK’s offshore windfarms, has warned that Brexit “could make the UK a less attractive place to do business”.

Petrol costs would also rise

The AA has warned that leaving the EU could cause petrol prices to rise by as much 19p a litre. That’s an extra £10 every time you fill up the family car. More cautious estimates, such as that from the RAC, still see pump prices rising by £2 per tank.

The EU is an invaluable ally in the fight against Climate Change

At a speech at a solar farm in Lincolnshire last Friday, Jeremy Corbyn argued that the need for co-orinated energy policy is now greater than ever “Climate change is one of the greatest fights of our generation and, at a time when the Government has scrapped funding for green projects, it is vital that we remain in the EU so we can keep accessing valuable funding streams to protect our environment.”

Corbyn’s statement builds upon those made by Green Party MEP, Keith Taylor, whose consultations with research groups have stressed the importance of maintaining the EU’s energy efficiency directive: “Outside the EU, the government’s zeal for deregulation will put a kibosh on the progress made on energy efficiency in Britain.”

India Bourke is the New Statesman's editorial assistant.