Retail FreeView - M&S regroups after dismal clothing sales and the exit of director Kate Bostock


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One retail sector that is not suffering from the rain is electricals; its problem is price deflation – unless you are Apple. The queue outside its Covent Garden store this Sunday suggested that Apple stores have become our places of worship now. M&S on the other hand is finding that shoppers no longer worship its clothing ranges. While rain has not helped the retailer, there are other factors at play. We give our views on the following slides and if you would like to comment on any of these stories, join our discussion group on LinkedIn.

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Retail FreeView - M&S regroups after dismal clothing sales and the exit of director Kate Bostock

  1. 1. July 12, 2012 Verdict Retail FreeView A synopsis of retail news and opinion About us Verdict is a retail information One retail sector that is not suffering from the rain is electricals; its problem is price deflation – unless specialist within the Informa Group. you are Apple. The queue outside its Covent Garden store this Sunday suggested that Apple stores With almost 30 years experience, have become our places of worship now. M&S on the other hand is finding that shoppers no longer Verdict publishes unrivaled worship its clothing ranges. While rain has not helped the retailer, there are other factors at play. We independent analysis. We provide a complete picture of the UK and give our views on the following slides and if you would like to comment on any of these stories, join increasingly the international retail our discussion group on LinkedIn. arena, helping retailers, Maureen Hinton, Verdict Practice Leader manufacturers, service suppliers, analysts, and consultants to fully exploit opportunities within the “There was definitely a step back in luxury market growth. But it industry. soon became apparent that the people who were really going to suffer from the downturn were not going to be the extremely rich; the luxury market started to boom again and has continued to do Latest analysis so.” Trends and Innovations in European Patrick O’Brien, Verdict Analyst, in The Guardian, July 4 Convenience Retailing | Verdict Strategic Report Pharmacy Retailing in the UK | Verdict “There are lots of women who used to shop at M&S who now shop Market Report elsewhere, Bolland’s unfamiliarity with clothing is a problem for the CEO Tesco Personal Care | Customer Insight as he seeks to fight back.” Global Department Store Retailing | Maureen Hinton, Verdict Practice Leader, in Bloomberg, July 8 Verdict Channel Report Footwear Retailing in the UK | Verdict Market Report UK Consumer Satisfaction Index 2012Web: | Tel: +44 (0)20 7551 9664 | Email:
  2. 2. July 12, 2012 Verdict View M&S regroups after dismal clothing sales and the exit of director Kate Bostock By Maureen Hinton, Practice Leader As M&S announced declines in both total and like-for- typical loyal shoppers, these shoppers are aging, and Execution has been M&Ss main problem. The retailer like sales in its core general merchandise category in M&S is not attracting younger shoppers to replace needs to communicate individual brand personalities Q1 2012–13, it also revealed a shakeup in its them. clearly to shoppers in its stores, its marketing must management structure, including a key exit. The encourage women to visit its stores and website, and retailer needs to inspire female shoppers and execute Clothing accounts for the majority of its general its stores must be easy to navigate and find products its existing strategy more successfully to regain its merchandise sales, which were down 5.1% in Q1 2012– in. These are all pillars of its existing strategy, but prominence. 13, with like-for-like sales down 6.8%. Some of this customers see little evidence of them. Belinda Earls decline was attributed to poor merchandising challenge will be to deliver this quickly, which may be M&S dominated the UK clothing market in the 1990s, decisions, which indicates a lack of confidence in the difficult given she will only be working two or three and was the prime destination for women of all age companys buying team. Furthermore, there has been days a week. groups for clothes shopping. In 1997 it accounted for speculation for months that executive director of 16% of the womenswear market; now its share is general merchandise Kate Bostock was looking for a around 11%, despite adding significant amounts of role elsewhere, which was bound to unsettle the new clothing space (at least 1 million sq ft) in the buying team even further. Following these latest figures meantime. Indeed, the fact it is still leader in the it comes as little surprise that she is leaving "by mutual clothing market is underpinned by it having more consent" in October. space than any of its competitors; the next largest by share, Next, has around half the square footage of The challenge for M&S is to inspire women to shop M&S in clothing, there again. To this end, the company is bringing in Belinda Earl as style director. She was very successful as The main factor behind its decline is that the CEO of Debenhams in differentiating and developing competitive landscape has changed over the past its house ranges as standalone brands, something M&S decade, and women are shopping elsewhere, be it in has been trying to do with its brands for years, albeit supermarkets, department stores, value retailers, with little success. online, or more inspiring specialists such as White Stuff, Zara, Topshop, and Hobbs. While M&S has retained itsWeb: | Tel: +44 (0)20 7551 9664 | Email:
  3. 3. July 12, 2012 News Review week by positioning the card as an alternative to the loyalty cards offered Clothing & Accessories by some of its rivals by providing customers with a tangible financial reward By Kate Ormrod for shopping at Asda, as opposed to offering loyalty points. Grocers are particularly well-placed to capitalize on the currently very weak consumer Tesco makes further changes to its clothing operations sentiment surrounding the banking industry, as their brands have survived Having only been placed in the position in September 2011, Tesco’s head of the ongoing economic uncertainty relatively unscathed, and are largely clothing Jill Easterbrook has been promoted to a newly created role in seen as more trustworthy and more stable than banks. This is highlighted by which she will be responsible for Tesco Mobile, Tesco’s Irish operations, the Marks & Spencer’s recently announced banking ambitions – having grocer’s One Stop chain of convenience stores, and its Nutri Centre revealed plans to open 50 branches over the next two years – and should business. Meanwhile, Jason Tarry, the head of Tesco’s F&F brand in Central Asda successfully market its card to its substantial customer base, there is Europe, will replace Ms Easterbrook. According to the company, Mr Tarry every possibility that it can match M&S’s goal in this area. has helped the F&F brand to flourish in Central Europe, where it has grown to become one of the leading clothing brands, and it is hoped that he can Morrisons looking to expand its convenience offering through replicate this success across the UK and Ireland. The handover of these responsibilities from being under the remit of company CEO Philip Clarke to Costcutter deal separate operations managers will allow the company to dedicate more Morrisons is said to be considering a deal with the Bibby Line Group, the resources and time to its peripheral business. This will allow Mr Clarke to focus owner of the Costcutter convenience store chain, in order for the grocer to solely on Tesco’s UK operations, which have faltered somewhat over the further its expansion into the convenience store market. Talks are said to course of the last year – in January, the company posted its first profit have been taking place since the end of 2011, with suggested options warning in 20 years following a poor performance over the Christmas period including the acquisition of Costcutter’s 157 company-owned stores by after many customers were put off by the company’s overt discounting Morrisons, or for the grocer to strike supply deals with franchisees. Morrisons stance during its Big Price Drop campaign. launched its M Local convenience format in June 2011, and to date has opened five stores in the UK, in Doncaster, Ilkley, Manchester, Wilmslow, and Birmingham. The company has stated its intention to open 70 stores by 2014; Food & Grocery therefore it needs to expand at a much quicker rate than it is currently. The By Cliona Lynch quickest way for it to achieve this would be through M&A, and striking a deal with Costcutter, with its considerable reach and expertise in the Asda launches Asda Money credit card convenience sector, would certainly help the grocer to accelerate its As part of an overhaul of its financial services offering, Asda has launched its expansion. However, Morrisons may not be able to adapt to a large-scale first credit card, offering holders unlimited cashback of 1% on purchases small store setup efficiently as the large number of stores will require a lot of made at Asda stores and 0.5% on purchases made elsewhere. The time and money to merge, draining resources from its core operations. company is hoping to target the 18 million customers that visit its stores eachWeb: | Tel: +44 (0)20 7551 9664 | Email:
  4. 4. July 12, 2012 News Review Electricals & Entertainment An extra life for the pre-owned games market? By Matthew Rubin The Court of Justice of the European Union ruled on July 3, 2012 that "an author of software cannot oppose the resale of his used licenses, allowing the use of his programs downloaded from the Internet." While this lawsuit Big plans for Maplin was brought to the courts by Oracle with regard to its own software, it could Maplin chief executive John Cleland has announced a business growth and have huge ramifications for the gaming industry. With the first of the next- rejuvenation plan at a cost of £40m ($62m). The investment will span three generation video games consoles expected to be released at the end of and a half years, with funds flowing into store refurbishment, developing its 2012, Nintendo, Sony, and Microsoft will have to consider the impact of e-commerce offering, and plans to grow the store portfolio by 50%. Maplin migrating users to direct downloads of game content. A recent will be looking to take advantage of an electricals market that is expected announcement by Electronic Arts (EA) labels boss Frank Gibeau stating that to return to growth by the end of 2013. By investing in a multi-channel the publishers goal is to go 100% digital in its content delivery points to the approach, Maplin stands to make strong gains; however, increasing the current intentions of the console industry. If the ruling is challenged and full store numbers by 50% carries a lot of risk. If the economy as a whole does support becomes law, it could delay the transition towards entirely digital not pick up as expected, a vastly larger number of stores could drag the downloads until a suitable method of controlling licenses can be found. This retailer down under the burden of high costs in a low-demand market. would extend the life of physical video games, which would be a lifeline for the already suffering Game Group. Game developer lawyers will be Apple struggling to grow in China desperately looking to find ways to work around the ruling; one such option US electricals giant Apple has not been able to meet its own retail may be to move to a “freemium” model whereby the basic game files are expansion plans for China in 2012, with the country proving more distributed for free, but revenue is earned through access to levels or online complicated than expected. In 2010, Apple set an objective of running 25 usage. branded stores in China by 2012, when in fact it operates two in Beijing, three in Shanghai, and just one in Hong Kong. There are, however, thousands of licensed sellers of Apple products in the country, but it is feared Home & DIY unlicensed sellers have been able to flourish amid a lack of store presence, By Matthew Walton jeopardizing the brand’s image. Apple has already paid $60m in July 2012 to a Chinese firm to settle a dispute over iPad naming rights, which, although Gleaming result for BrightHouse small in the context of the potential demand, showcases the difficulties that BrightHouse has reported surging revenues, up 17.1% to £266.5m ($412.7m) in lie ahead. the year to March 31, 2012. Operating profits increased at a slower rate, from £33.6m ($52.0m) in 2010–11 to £34.8m ($53.9m) in 2011–12. The rent-to- own retailer currently operates 253 stores across the UK and plans to open a further 35 in the current financial year, up from 25 in the previous year.Web: | Tel: +44 (0)20 7551 9664 | Email:
  5. 5. July 12, 2012 News Review The weekly, fortnightly, and monthly payment programs have found strong market appeal in an economy suffering from weak consumer confidence; however, there will be a risk of falling demand when the economy improves. Many big ticket shoppers have found products within their budget due to no upfront costs, despite the overall payments usually adding up to more than they would with a regular retailer. While disposable income continues Stay in touch to be squeezed the retailer will find strong demand; however, BrightHouse must be cautious of negative press surrounding its payment structure, as it can promote unaffordable purchasing. Contact us to see how we can help Tel: +44 (0)20 7551 9664 Email: Dragon takes control of Robert Dyas Dragons’ Den star Theo Paphitis has taken over hardware chain Robert Dyas Share your views with our analysts and the Verdict community through our for a reported £10m ($15.5m). Paphitis, who currently owns retailers as varied social media channels. as Ryman and Boux Avenue, has a reputation for taking underperforming LinkedIn retailers and turning their fortunes around. Robert Dyas was previously Twitter thought to have a price tag of around £15m ($23.2m), with Wilkinson initially signaling interest; however, the value retailer subsequently withdrew from Sign up to our emails for news from the UK and across the globe. the bidding process. Lloyds, which held some of the debt and was the Verdict FreeView biggest shareholder, put the retailer up for sale this year, despite it posting an underlying profit of £3m ($4.6m) in 2011. By managing to remain profitable, the hardware chain looks to have a bright future; however, the new buyer needs to ensure store investment is maintained to remain competitive.Web: | Tel: +44 (0)20 7551 9664 | Email: