Has Marks & Spencer finally turned the corner on fashion?

It has only taken 20 years and the majority of its historical competitors crumbling around it, but is it safe to say that Marks & Spencer’s has finally turned itself around?

Thanks to Percy Pig (oink!), closing loss-making stores, its serendipitous online food partnership with Ocado and the green shoots of growth in its clothing division, Marks & Spencer does feel like a company that has got its retail mojo back.

The 138-year-old British brand revealed last week that it was "confident" of profits of £500 million in the coming financial year as clothing and home sales jumped 37.7% year on year and were up 3.2% on two years ago. It has also seen its share price grow an incredible 52% over the last six months and 82% over a year; it is currently sitting around 223p. Though still a long way off its peak in 2007 of 707p, it is a vast improvement on recent fortunes and compared to many retail shares at the moment.

Its latest profit forecast of £500m (first made in November) compares to pre-pandemic profits of £159m, with CEO, Steve Rowe, saying it was “clear that underlying performance is improving”.

We’ve seen false starts from M&S turnarounds before, but this time it feels different. It feels like a company with confidence, momentum and, finally, some excitement and aspiration.

From the Romford store’s Christmas TikToks to buying into "responsible" womenswear brand Nobody’s Child, it does feel like a company with impetus and choosing to lead again, rather than happy to play catch up.

“There’s very little disagreement that the much-vaunted recovery is underway. A lot of the main worries, like womenswear, e-commerce, property strategy and jaded stores seem to have been addressed, although one of the big problems – a seeming lack of engagement with younger fashion shoppers – is still a concern.”

Bryan Roberts, Shopfloor Insights

Bryan Roberts, Analyst at Shopfloor Insights, says: “There’s very little disagreement that the much-vaunted recovery is underway. A lot of the main worries, like womenswear, e-commerce, property strategy and jaded stores seem to have been addressed, although one of the big problems – a seeming lack of engagement with younger fashion shoppers – is still a concern,” he says.

Steve Rowe was appointed CEO of Marks & Spencer in April 2016 and Archie Norman was appointed Chairman in September 2017. With nearly five years of this combined leadership, what have they done differently to make this happen and what has worked well for them?

“In womenswear, they seem to have finally cracked fashionability to some extent, with availability, marketing and merchandising also much improved,” says Roberts. “Collaborations with third-party brands in-store and online have undoubtedly helped too and the move into athleisure was a well-timed venture,” he says.

The Goodmove athleisure line

“The food business really continues to fire on all cylinders and new store formats mean that they are running the most impressive mainstream supermarkets in the business. In property, they’ve taken some tough decisions which have been horrible news for some town centres, but the figures from the new OOT combined stores speak for themselves,” says Roberts.

Marks & Spencer has said it plans to close another 30 shops over the next 10 years as part of its turnaround plan. It has already closed or relocated 59 main stores, as well as slashing 7,000 jobs across stores and management.

Another 80 will be moved to better locations or merged with nearby shops and the group will open 17 new or expanded main stores over the next two years, including in a number of former Debenhams sites

"We are committed to stores and believe they can be a true source of competitive advantage," CEO Rowe told investors and journalists on a conference call in May 2021. "But they need to be the right stores, in the right location, with the right services.”

There is an argument that M&S is doing well because many of its competitors have disappeared. It is arguably the most significant large store in many UK towns, now, with the disappearance of Debenhams and the reduction in stores by House of Fraser and John Lewis.

“This might have helped a little, but some of the main threats – Primark, Next, JLP, supermarkets – are still going strong. There’s been a little bit of pressure taken off with the demise of Debenhams, but M&S deserves credit for driving its own destiny,” says Roberts.

Many investors were asking why it took so long. “Some of that is due to some hires not being as successful as hoped, some of it was a pure identity crisis, the e-commerce missteps were profoundly unhelpful and some of it was down to the core fashion proposition,” says Roberts.

M&S is fully embracing online, allowing it to reach new markets with lower risk. At the start of 2021 it announced the launch of 46 new websites around the world, including Argentina and Uzbekistan.

“I’m still not 100% sure why I bother getting my Sparks card scanned as the benefits are nebulous.” says Roberts.  “And I can’t be alone in thinking that there are only so many things you can slap Percy Pig branding on.” he says thinking about further improvements to the business.

Marks & Spencer has launched a rental trial with Hirestreet, including the Ghost X M&S line

With the fundamentals much improved, Marks & Spencer seems a business willing to experiment. It has moved into the clothing rental market with Hirestreet, launched the famous American toy retailer, FAO Schwarz, (famed for unique toys, life-sized plushes and interactive experiences) in 20 stores across the UK and on M&S.com. A men’s rugby shirt branded with "St Michael" (its former and much loved in-house brand), previewed from the new SS22 men’s collection, started a social media buzz and there is even talk it is circling traditional Savile Row name, Gieves & Hawkes, after its dip into receivership. But, not everybody thinks the turnaround job is fait accompli.

Retail Analyst, Richard Hyman says: “I think there is confusion about use of the word ‘turnaround’. What they’ve done is get better at the narrative. In order to turn the company around, it needs to be reflected in trading and produced in a way that is sustainable,” he says. “They’re not selling enough clothing product numbers with pluses in front of them.” he says. ”For a business to be turned around they need to do more than rearrange the deckchairs and make the packaging a bit prettier.”

Marks & Spencer has been losing market share in clothing for many years. Hyman thinks this is down to them lowering the quality and disinvesting in its products. “The quality and the relevance of the product has been in decline,” says Hyman. “Without investing in the product a turnaround isn’t really possible.”

“When I walk into an M&S store, still where most of sales take place, I don’t think it is convincing or compelling. I do think it looks better, but that’s from a low base.”

Richard Hyman, Retail Analyst

“I think they are going faster, no doubt, but are they going faster in the right direction?” he says. “When I walk into an M&S store, still where most of sales take place, I don’t think it is convincing or compelling. I do think it looks better, but that’s from a low base. The rest of business has failed to capitalise on the footfall from the food business,” says Hyman.

“Everyone is drinking the Kool-Aid. I’m not one to be swayed,” he adds.

Hyman does think that separating the businesses more structurally and the heads having more clearly defined roles, plus Norman’s very hands on style, has helped Marks & Spencer recently.

Jaeger is now part of M&S

The latest financial figures look good and are a vast improvement on recent years. Marks & Spencer was a brand known for quality clothing, but the market and consumer expectations have changed over this century. Marks & Spencer cannot compete on price, if it returns to its previous quality, but there is an opportunity with premium brands like Jaeger – which it bought in January 2021 – to offer better product at higher prices.

Marks & Spencer has a wealthy core demographic and these older consumers feel younger for longer and it feels like M&S is starting to recognise that.

Womenswear will always be highly competitive category and a subject that everybody has an opinion on. Selling a few pink coats, like in the past, simply won’t cut it. You’re only as good as your last product. You need consistency and volume.

Marks & Spencer does feel like a business that has turned a corner and its future is looking as rosy as Percy Pig’s cheeks.