Marks and Spencer is eyeing further expansion of its Simply Food convenience store network, the UK retailer told just-food today (21 May).
M&S opened 31 Simply Food outlets in the year to 30 March, meaning the estate grew to 419 stores.
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“We continue to see significant opportunity as we look forward over the next three years,” CFO Alan Stewart said after M&S reported its annual results. “Some of that is within owned stores and some of that is in franchise. We have a successful franchise operation.” Twenty-three of the 31 new Simply Food stores opened in M&S’s last financial year were franchise outlets.
M&S’s food business saw like-for-like sales increase 1.7% in the last 12 months. The retailer does not provide a specific sales figure for Simply Food outlets but said sales from the format increased.
The UK convenience channel is one of the fastest-growing channels in the country’s food retail sector. Other major grocers are continuing to expand their convenience store network. Earlier this month, Sainsbury’s said it would open its 600th c-store this year and chief executive Justin King claimed he envisaged the retailer having 1,000 Locals in its network.
Asked whether M&S felt it had to speed up the expansion of its Simply Food estate amid the competition in the channel, Stewart said: “We have been pretty focused on it. We know the format works for us and like most retailers we have a lot of sites we are busy targeting.”
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By GlobalDataWhile M&S is planning to expand in the UK convenience channel, chief executive Marc Bolland insisted the retailer has no plans to extend its business into another buoyant sector: online grocery.
Nevertheless, the retailer has ambitions for Simply Food in Europe. It plans to open six Simply Food outlets in the Netherlands and also wants to open the format in France, where it will soon have five full-line stores in and around Paris.
M&S returned to France in November 2011 with a store in Paris, a decade after quitting the market. Bolland then said the retailer was in talks to open Simply Food stores in France and hoped to announce details within 18 months.
Speaking today, chief executive Marc Bolland said M&S had “no announcement to make” on whether it had secured a franchise partner in France but added: “We are looking at the development of Simply Food.”
M&S’s food business is a bright spot for the retailer, which again saw general merchandise sales fall in the last 12 months.
Reflecting on M&S’s performance in food, Bolland said the retailer was “leading” the market on innovation and on health.
“We were market-leading in innovation. We have brought again nearly 2,000 new lines that actually made a difference. We brought out 2,000 new lines on a basket of 7-8,000 new lines,” he said. Secondly, we are market-leading in health. If you look at market shares, Simply Fuller Longer has a 37% market share and Count on Us has a 19% market share on convenience food for health.”
The 1.7% increase in UK like-for-like food sales included a rise in volumes. Stewart said the higher volumes had helped in contract talks with suppliers and was a factor in improved food margins in the last 12 months. Gross margins from food increased 35 basis points.
“One of the benefits when you are building your volumes is you can start engaging in [conversations] of ‘Give us a better price because we are giving you more volume’,” Stewart said.
Food margins, he added, were also helped by better promotion management. “It’s linked to the systems capability we have invested in. It’s linked to better co-ordination in terms of knowing what our marketing is going to be and what we are buying behind it,” he said. “Going forward, it will be much more about availability and systems.”
