Workers at Marks & Spencer are set to benefit from bumper payouts of thousands of pounds under its share save scheme as the high street stalwart reaps the rewards of its turnaround plan and toasts its “best ever Christmas”.
The FTSE 100 retailer said that more than 9,200 employees — most of them customer service assistants — who had put a typical £150 a month into its 2020 share save scheme would gain over £10,000 when it pays out on February 1.
The announcement came alongside a Christmas trading update that revealed a performance that was better than expected as shoppers turned to M&S for groceries and clothing.
Overall like-for-like sales at the retailer rose by a record 8.1 per cent in the 13 weeks to December 30, compared with the same period in 2022. It marked an 11th successive quarter of sales growth at M&S. Food sales increased by a record 9.9 per cent in the 13 weeks, beating market expectations, as consumers increasingly used M&S for “more of their full shop”.
Stuart Machin, the company’s chief executive, said there had been double-digit growth in sales of salads, fruits and vegetables compared with the previous Christmas: “We never used to be known well known for core grocery, but actually our grocery sales were up 24 per cent on last year and our household core items were up 30-plus per cent on last year. Our food business is becoming a different food business. It’s not just for Christmas.”
He said M&S had taken share from “some of the competition”, including Waitrose, its closest rival, and added that “we think we can gain share from the market overall”. M&S and Waitrose each had a 3.8 per cent share of the grocery market in the 12 weeks to December 30, according to Nielsen IQ, the market researcher. That was an improvement for M&S from a year earlier, when its slice of the market was 3.7 per cent, while Waitrose’s share fell from 3.9 per cent.
Demand for new Christmas products was strong, up by 14 per cent compared with the previous year. It sold 725,000 “snowy” night projector tins and 723,000 shortbread light-up tins. Record sales of cranberry sauce and “Christmas creams” also helped to drive overall growth.
Sales in its clothing and home business rose by 4.8 per cent, beating expectations of a 2.8 per cent rise, with womenswear sales particularly strong as the company improved its style credentials. The retailer sold more than 150,000 sequin products. Bestsellers included its £29.50 black sequin jumper, with 23,000 sold, and £55 sequin elasticated waist trousers, with 19,000 sold.
Machin, 53, said the growth in clothing was partly a result of offering fewer discounts. “We didn’t want to discount because our commitment is not to put prices up,” he said. “We wanted to stick to our value pricing. What we’re doing is making sure we price right first time, so it’s a very different strategy [from other retailers].”
The strong Christmas trading update marks the latest sign of the turnaround taking place under Machin, Katie Bickerstaffe, 56, his co-chief executive, and Archie Norman, 69, the chairman. M&S, which has more than a thousand shops in Britain, staged a dramatic return to the FTSE 100 share index after four years last summer. The 140-year-old retailer, a founding member of the index featuring Britain’s publicly quoted companies, was demoted to the mid-cap FTSE 250 in 2019 after coming under pressure from online competition and amid stalling growth from its groceries business.
Its directors have been trying to build a more resilient business after several decades of false dawns and various iterations of a “fix the basics strategy”. They have focused on the quality and value of its clothing and food, heavy investment in technology and ecommerce and shutting dozens of larger shops, while refurbishing others.
The revival has been most dramatic in clothing, which has often been a source of woe for the retailer. The fashion team, including Maddy Evans, the womenswear director, as well as Richard Price, the clothing and home director, has been celebrated for bringing the British institution back to life.
Machin said that there was more to do to revive the business, including at Ocado Retail, its joint venture with Ocado Group, which has been struggling to keep up momentum since the online boom during the pandemic.
The M&S boss said the company had been “doubling down and supporting the Ocado reset” with Hannah Gibson, the Ocado Retail chief executive. He said 90 per cent of the M&S range was now on the Ocado platform and that the partnership was “very strong”, but declined to comment on whether the final instalment of £190.7 million from the joint venture due by August this year would be paid. Ocado Group will issue its own Christmas trading update next week.
Machin sounded a note of caution over economic uncertainty and increased costs from higher wages and business rates. When asked if the retailer was being overly cautious, he said it was better to be “cautious and not to over-promise. M&S has a history of over-promising and under-delivering and then inconsistency.”
He said that supplies of its products could be delayed if disruption to shipping in the Red Sea continued. “We’re conscious of the costs and also more importantly the availability of new ranges,” he said. “We haven’t experienced that yet, but we’re expecting maybe some slight delays in newness in February and March. That’s really clothing and home and we don’t expect our food business to be affected by it.”
He said the group had entered 2024 “with a spring in our step” and was confident that results for the year would be “consistent with market expectations”. Analysts are expecting full-year profits before tax of £667 million, compared with £482.0 million last year and £522.9 million the year before.
Shares in M&S, which have risen by about 80 per cent over the past year, fell by 14½p, or 5.2 per cent, to 263¼p, a decline blamed by some analysts on investors’ profit-taking and by others on the company’s cautionary outlook.