Marks & Spencer is pushing hard to capture the British weekly shop
Marks & Spencer hasn’t been subtle about its ambitions to dominate the British weekly shop and the retail giant is approaching a vital update on its venture into the UK’s intensely competitive grocery sector.
M&S Food represents more than half (54 per cent) of the retailer’s revenues, and its recent warehouse expansions indicate the FTSE 100 retailer is eager for a share of the UK’s supermarket market. The company will unveil its full-year results on Wednesday, hoping its food expansion will help it reclaim a narrative that had been overshadowed by last year’s cyber attack which left it struggling.
On Monday, M&S spent £66m on a 437,000 sq ft warehouse from online retailer Asos and later in the week revealed it has begun constructing a new £340m food distribution centre in Northamptonshire. The new warehouse – M&S’ largest ever investment into its food division – was described by food logistics chief Kevin Bennett as the company’s “major step in transforming [it] into a true destination for the weekly shop”, as reported by City AM.
M&S celebrates record grocery share
The retailer has lately pumped investment into renovating its stores and claims this is attracting more customers. Sales in the firm’s food business surged 5.6 per cent year on year according to M&S’ Christmas trading update, as the retailer celebrated its biggest-ever grocery market share – rising to four per cent in November. This indicates M&S Food is making a play for its upmarket competitor Waitrose – which holds a 4.6 per cent market share – yet still trails considerably behind sector heavyweights Tesco and Sainsbury’s.
Britain’s supermarkets have been locked in a fierce battle to keep prices down amid mounting food inflation triggered by the Iran war – which a leading industry body cautions could hit double figures this year. Tesco and Sainsbury’s have both declined to put a figure on likely price increases in an attempt to avoid alarming shoppers, but have urged the government to slash grocers’ energy bills.
M&S will also be hoping that its thriving food division emerges relatively unscathed from the devastating cyber attack that struck the retailer in April last year. The attack laid bare the vulnerabilities in the company’s supply chains, leaving some shelves bare and forcing its website into a 12-week shutdown.
It was “not an overstatement to describe [the attack] as traumatic,” M&S chairman Archie Norman said in July, telling MPs it felt like hackers were “trying to destroy” his business.
M&S hopes to forget ‘traumatic’ cyber attack
M&S managed to recoup only a third of its £300m in lost sales through insurance, and saw the blow to trading profit soar to £324m in the first half of that year alone. However, chief executive Stuart Machin has since sought to deploy his forthright, hands-on approach to the retailer’s recovery – a strategy he describes as “positive dissatisfaction”.
In recent months, M&S’ retail director Thinus Keeve has spearheaded – at times scathing – demands for the government and the Mayor of London to tackle violent shoplifting, labelling it a “systemic issue”.
Richard Hunter, head analyst at Interactive Investor, said: “M&S will be glad to see the end of a year where the cyber disruption was the unfortunate highlight.
“Even so, the group’s healthy financial position helped it to weather the storm, and indeed M&S continued to make investments in the business despite the cyber-related costs elsewhere.”
The retailer’s share price has been on a turbulent journey in recent months, climbing to a recent peak just before the Iran war erupted, before tumbling back towards its cyber attack lows.
The stock has dropped by around three per cent in recent days, to 317p, and sits 11 per cent below where it stood at this point last year. Should M&S wish to win over investors, it will need to match consensus forecasts of £16.4bn total sales and a £603m pre-tax profit.
