Announcing its full year results for the 52 weeks ended 28 March 2020, Marks and Spencer said the UK M&S Food business outperformed the market and saw strengthening sales performance as changes to range, value, and customer communication took effect. However, CEO Steve Rowe said the retailer already had plans in place for a business and a world that “will never be the same again.”

Revenue increased 2.1%, with like for like sales up 1.9%, strengthening throughout the year, including an estimated 0.3% benefit from the effects of Covid-19 in March. Operating profit before adjusting items increased 11.2%.

Steve Rowe, Marks & Spencer CEO said: “Last year’s results reflect a year of substantial progress and change including the transformative investment in Ocado Retail, outperformance in Food and some green shoots in Clothing in the second half. However, they now seem like ancient history as the trauma of the Covid crisis has galvanised our colleagues to secure the future of the business. The way our people have rallied to support our customers and communities has been awe-inspiring.

“From the outset we recognised that we were facing a crisis whose effects and aftershocks will endure for the coming year and beyond. Whilst some customer habits will return to normal others have changed forever, the trend towards digital has been accelerated, and changes to the shape of the high street brought forward. Most importantly working habits have been transformed and we have discovered we can work in a faster, leaner, more effective way. I am determined to act now to capture this and deliver a renewed, more agile business in a world that will never be the same again.”

The retailer says it set out the strategy for Food 18 months ago, rebuilt the leadership team and started the repositioning of the business to broaden its appeal and move to ‘trusted value’. The programme was reported to have been picking up momentum prior to the crisis:

  • Price investment was said to have been further strengthened through the launch of ‘Remarksable’ value and ‘Fresh Market Special’ lines, many at 65 pence. The level of promotions also continued to reduce. As a result, the price index of comparable product baskets has improved compared with key competitors, resulting in better price perceptions.
  • A new programme of range innovation was brought forward including significant launches in healthy, Plant Kitchen, made without, and family product to broaden appeal. This was combined with new marketing including Little Shop and Britain’s Got Talent sponsorship.
  • 5 ‘test and learn’ renewal Food stores were opened showcasing more of the full M&S range in a modern environments and testing new product innovations with encouraging results. M&S says it expects to move towards extension of these formats in the coming year.
  • M&S says Project Vangarde, which has now been rolled out to 90 stores, has demonstrated scope for reducing waste, improving availability and running stores more efficiently.

Ocado Retail positioned strongly for growth

During the year M&S completed the purchase of 50% of Ocado Retail providing it with what it says is a profitable, scalable presence in online grocery, the UK’s fastest growing channel. It reported a first time net income contribution for Ocado Retail to group profit of £2.6m for the 7 months to 1st March 2020, with the early contribution reflecting the limited period since completion. This is the contribution to group results prior to switchover to M&S supply on 1st September, which M&S says it expects to drive volume growth for M&S Food.

The retailer says it has been working closely with Ocado Retail to create a ‘one business’ mentality which includes common operating procedures, business plan, and shared talent. Switchover and synergy plans are said to be on track. The value of the investment it has made has been further reinforced by the strong growth reported by Ocado Retail since lockdown, with growth for the most recent 9 week period of 40.4% reported at its AGM on 6th May.