M&S store closure strategy amid wider online shift “must be applauded” according to analysts

Marks & Spencer’s dramatic store closure programme to streamline its estate and focus on online sales “must be applauded”, according to analysts.

Yesterday the retailer announced plans to close 30 stores and reduce the offering in others as it reeled from a £201.2 million loss in the year to April 3.

Despite the dramatic shift into the red, analysts believe the retailer’s efforts to modernise its offering, moving away from large numbers of stores towards a more digitally focused offering, is a largely positive step.

According to Hargreaves Lansdown’s equity analyst Sophie Lund-Yates the “work being done to streamline the store estate and drag more of the business online must be applauded”.

However, she went on to warn that its was “too early to call” if these efforts have come too late to save the retailer, adding that a restructuring effort “this intense comes with huge risk”.

Other analysts also celebrated M&S’ significant efforts to restructure its business, including the launch of its joint venture with Ocado in September which has seen its food be made available online for the first time in its history.

Salsify’s senior vice president Vijayanta Gupta said: “The deal with Ocado is being touted to boost M&S in the grocery sector, reaching customers through a modern and premium online interface.

“M&S’ share of Ocado Retail net income rose to £78.4 million this year, from £2.6 million in the previous year, demonstrating that the Ocado partnership was a sound move for the business.”

READ MORE: M&S to close 30 stores after £201m loss

M&S says it plans to increase capacity to sell groceries online by 50 per cent over the next 18 months, and now sees 25 per cent of all food sales come from Ocado.

Edison Group’s director of research Neil Shah added: “Excluding Ocado, group online revenue was £1.5 billion, representing a 53.9 per cent growth (which in the short term helped hedge against the 56.2 per cent decline in store revenue).

“Meanwhile, Ocado orders now comprise, on average, of over 25 per cent. M&S products. Such placement is vital going forward, as Ocado remains close to the fore in an ever more competitive grocery delivery market.”

Meanwhile M&S has also made significant changes to its fashion offering, investing heavily in its online platform and welcoming third-party brands to its shelves for the first time.

Gupta continued: “While it is too soon for the benefits of this approach to be reflected in the M&S results, the strategy will eventually see the business bolster its customer base and its online sales.

“M&S has made a sound start in carefully curating a selection of brands relevant to target consumers.  Offering this range of brands will bring in new shoppers and increase purchases and revenue.

“In Q4, clothing and home sales were down 15.5 per cent, compared to 24.1 per cent in Q3. However, this was better than most estimates of a -30 per cent decline. Longer term, the M&S approach to apparel has the potential to pay off. However, it cannot take its foot off the pedal.”

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