Marks and Spencer chief executive Marc Bolland has insisted the UK retailer’s product development sets it apart from rival grocers as he faced questions over the launch of a cut-price own-label range.
Eighteen months ago, Bolland announced the outcome of his strategic review of M&S’s business after his first four months in charge. He positioned the retailer as a specialist grocer, while also increasing the number of SKUs on offer by around 1,000 products.
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Two weeks ago, the upmarket retailer introduced Simply M&S, a line of low-priced products to replace the Wise Buys range launched in 2008. The portfolio of 800 “everyday” lines will be price-checked against the likes of Sainsbury’s and Waitrose.
However, speaking to reporters after M&S reported its annual results today (22 May), Bolland faced questions over whether the retailer was positioning itself more closely to its rivals.
The Dutchman insisted the launch of Simply M&S echoed the plans announced in November 2010 and emphasised the retailer’s record of new products was a point of difference to its competitors.
“We said 18 months ago we’ve got to give [shoppers] the specialness but we’ve got to give them also the opportunity to do a fuller shop. What we said 18 months ago is exactly what we are going to do,” he said.
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By GlobalData“We’re not saying we’re in the multi-pack baked beans business. We’re able with 800 lines to allow people to do a fuller shop. It’s all at M&S quality against very strong prices. We think there’s an element where people would reappraise, go through the store, find product and say: That’s actually really good going. This replaces Wise Buys, we brought choice, more product in there, we even innovated on some of the products and all of it is Marks and Spencer quality. No compromise on quality.”
He added: “We are bringing more innovation, double if not triple the innovation of anyone else in the market; 1,900 lines out of 6 or 7,000 lines is a level of newness that none of the food competitors will come close to. What we felt, however, was that we needed to be clearer of what our offer was for a fuller shop.”
M&S’s results, which included higher sales and gross margin from its UK food business, outlined a revised sales forecast for the retailer. In November last year, Bolland set a target for M&S to grow its annual sales by GBP1.5-2.5bn over the following three years. However, the company now sees sales increasing by GBP1.1-1.7bn. Bolland pointed to the worsening conditions in the UK economy since November 2010 and insisted M&S’s strategy was working.
“I was guided by the economic growth in the UK being up 2.2% in GDP and inflation of 2%. We have seen over the last 18 months 0.6% GDP growth and inflation up at 5%. With a changed economic climate that we’ve all seen, we’re still on track,” Bolland said. “We are falling short not because our UK stores aren’t performing well. Our stores are showing growth but the economy is not allowing us to grow much faster. This brings realism into the numbers. It’s still a big challenge. We believe we need to keep that ambition alive because it has been mindset-changing for the company.”
M&S also set out plans to spend GBP200m less on its domestic retail estate than it forecast. In the next 12 months, the retailer said it will increase its space by 3% and then by 2.5% the year after.
The company said it would develop its space “selectively, particularly Simply Food stores, which have been a very successful format”.
M&S has over 350 Simply Food stores but, speaking to just-food, Bolland refused to be drawn on how many of those outlets it planned to open in the next 12 months.
“We cannot give you an exact number there for competitive reasons. If we can find the right store at the right space, we will take it. We’re not in the race for space. There will be others investing a lot more in space than us. We’ll be very considered in our growth but if we find good locations for convenience or out of towns we will take it.”
The retailer also plans to open 100 stores overseas per year. M&S’s international business focuses on clothing with a limited range of food in some outlets and Bolland said the retailer could continue with this strategy.
However, Bolland hinted M&S could look at increasing its food network in Paris, where it opened its first outlet, including grocery, last year. It has plans for four more full-line stores in Paris.
“In Paris, we could foresee doing food because supply chain wise it’s possible to drive there as easy from here to Paris as it is from here to Scotland. Further out, we are talking very limited food,” he said.
