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Marks & Spencer Full-Year Results – What The Analysts Said

Marks & Spencer has pledged to 'accelerate change' across its business after the business posted a 1.9% decrease in group revenue, and a 21.2% decrease in profit in the year to 28 March.

Commenting on the retailer's performance, chief executive Steve Rowe said, “Last year's results reflect a year of substantial progress and change, including the transformative investment in Ocado Retail, outperformance in Food and some green shoots in Clothing in the second half."

Here's how leading analysts viewed the retailer's performance.

Russ Mould, AJ Bell

“Seemingly forever stuck in turnaround mode, the latest results from Marks & Spencer provide a few interesting snippets about the business. Its food business is more profitable than its clothing arm, a reflection of how it has cracked the proposition for the former and continues to disappoint with the latter.

“It is going to sell core clothing items via its Ocado online grocery joint venture, meaning customers will be able to get pants and socks with their Percy Pigs sweets and avocados. That makes perfect sense and it should be an easy win for Marks & Spencer, particularly as margins are likely to be much higher on clothes.

“If fewer people are visiting its stores for clothing essentials, this is a chance to cross-sell items with little effort as people go through the checkout process for their online food shop.

“Separate to the online grocery offering which launches in September, it is going to sell third party clothing products online to broaden its appeal and drive web sales. This tactic is already being used by Next and has been trialled by H&M. The challenge here is not to dilute the appeal of its own clothes."

Clive Black, Shore Capital

"Marks & Spencer calls out market change - digital acceleration, the shape of the high street and working habits - but also its discovery of a faster, leaner and more effective way to work. A streamlined senior team, with key appointments now in place, is 'getting stuck in' to a turbocharged Transformation Programme, 'Never the Same Again', that we believe with good work on liquidity means M&S will be a survivor.

"Cautious scenario analysis by the Group firstly shows a strong capability to counter a deep frost, indeed 6W into FY2021 with improving exit trading rates, M&S is comfortably ahead of said scenario, with scope for ND to be stable at the year-end. Guidance remains withdrawn as are our forecasts but in adversity, we are as enthused about M&S as we have been for some time."

Adam Tomlinson, Liberum

"Adequate liquidity, a trading food business and an 'essentials' focused Clothing & Home that is ‘mothballable’ should allow M&S to come out of the COVID-19 pandemic in a better shape than other apparel retailers.

"M&S is using the COVID-19 crisis to quickly but meaningfully address the structural long-term challenges of excess selling space, a modest online offer and range issues in Clothing and Home, which will rebase future prospects. A spate of new senior management hires could potentially take this opportunity to make further significant strategy changes.

"The current £1.6 billion market cap includes the Ocado investment, which was valued at £750 million a year ago and is now likely to be worth more given the accelerated consumer transition to online grocery delivery."

Sofie Willmott, GlobalData

"It is positive news that the retailer is grasping the opportunity presented by the pandemic and learning lessons about how quickly it needs to react but as is often the scenario with M&S it is too little too late and it should have adjusted years ago like many of its competitors did.

"If its online channel had been prioritised when digital sales were booming, it would have already shifted shoppers online and been able to reap the benefits now. Consequently, despite clothing & home online sales increasing by 6.4% in the past six weeks this has had very little impact on a business that is so reliant on stores, with total clothing & home sales down 75.0%.

"M&S has lots of new faces joining its leadership team over the next few months and their biggest priority must be online. In all retail sectors, online will continue to outperform with channel shift accelerating this year as a result of COVID-19. In FY2019/20, its online clothing & home sales fell 0.2%, and it cannot rely on Ocado to drive clothing sales. Improvements must be made to its own website to try to entice shoppers and achieve some growth this year.''

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine

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