Record Christmas food sales at M&S outperform market
'Highly differentiated food offer' comes up trumps for M&S over Christmas, but general merchandise sales struggle
8 January 2015
Marks & Spencer has recorded a strong Christmas in food, but a difficult quarter in general merchandise (GM), according to its Q3 2014/15 Interim Management Statement, for the 13 weeks to 27 December 2014.
The group’s food growth, with record sales up +17% during the key Christmas week, is likely to have been the envy of the UK’s Big Four. Throughout the quarter, M&S’ food growth outperformed the market with sales up +2.8% and +0.1% in like-for-like terms.
Stephen Springham, senior retail analyst, Planet Retail described the group’s food business as “one of the standout performers in the entire UK retail market over Christmas”. According to Springham: “Any like-for-like growth, however meagre, is a phenomenal achievement in the context of a UK grocery market that is contracting amid wholesale structural change. What any of the Big Four would give for M&S’ growth in food sales!”
Not surprisingly, chief executive Marc Bolland was upbeat, stating: “Our food business delivered another excellent quarter, significantly outperforming the market by circa 3% pts…Customers once again turned to us for our highly differentiated food offer, combining the best of quality, seasonal speciality and convenience, all at competitive prices. We launched nearly 750 new products giving customers more choice than ever, with record results in turkeys, party food, desserts and deli.”
However Bolland admitted the business had suffered a “difficult quarter” in general merchandise, with sales down -5.4% and -5.8% on a like-for-like basis. He attributed this to the clothing sector being impacted by unseasonal conditions in October and November, with warmer weather than normal. Disruption at the Castle Donington e-commerce distribution centre also affected the group’s performance in December.
Bolland maintained that the group’s new website “performed well operationally, even through periods of peak demand”, with customer satisfaction and conversion continuing to improve.
Not everyone is convinced about this multi-channel success though. According to Planet Retail’s Springham: “The biggest question marks still hang over the efficiency of M&S’ e-commerce operation. In the first half of the year M&S.com’s sales were down a staggering 6.3% in the wake of a botched re-launch of the website. Anecdotal evidence over the festive period suggests that fundamental website and fulfilment issues have yet to be resolved. In what John Lewis has a dubbed a “click & collect Christmas”, M&S may have come up criminally short.”
On the other hand, Springham praised M&S for neither being “suckered into the frailties of a Black Friday frenzy, as was John Lewis; nor display[ing] the stoic resistance of Next and eschewing all promotional activity until the post-Christmas sales.” Instead, M&S maintained “a rolling programme of targeted campaigns across the festive period”.