If Marks & Spencer's Christmas figures are anything to go by, the pixie dust Marc Bolland sprinkled on Morrisons to make it fly has been in short supply. Yesterday's trading statement was no Christmas cracker and the shares would have taken a beating had it not been for a bravura performance by the retailer's food halls. That saved Mr Bolland's bacon, at least for now.
But while food accounts for almost half of M&S sales, it doesn't offer much in the way of margins, even if you occupy a higher niche in the market than, say, Morrisons. Those parts of the M&S portfolio that do are under pressure. Sales of "general merchandising" in stores open for at least a year took a tumble, even after discounting (which is squeezing M&S's margins again). This was in part blamed on the company's decision to pull out of technology, which is a just tad disingenuous given that technology only ever accounted for a small proportion of its business. That's why it pulled out of selling it.
John Lewis rather gave the impression everything was rosier during the festive period than people feared. But M&S – with more than 700 shops and 21 million customers a week from a wider demographic than Lewis's – is a much better bellwether. It is showing that the outlook is bleak and yesterday's announcement of more price cuts in an attempt to entice back some of the customers it has lost should come as no surprise. There will be more to come and margins are likely to remain under pressure for some time. Good news if you are an M&S customer (or an ex-M&S customer who finds Primark a little déclassé). Good news, too, if you're on the Bank of England's Monetary Policy Committee. Those forecasts of a fall in inflation might now actually start to come true. It's a year or so late but there won't be any need to raise interest rates for a while yet. Given the state of the economy, a bit more stimulus wouldn't go amiss, though the factor most likely to hold back growth over the next few months is a lack of available credit.
As the British Chambers of Commerce has pointed out, it isn't really clear how the MPC's programme of bond buying or "quantitative easing" will address that.
Bad news all round for M&S shareholders, who were asked to stomach a gazillion-pound "golden hello" payment for Mr Bolland to entice him out of Morrisons. Of all the supermarkets, Morrisons is the one most dependent on food – it has far less of a "general merchandising" offer than rivals such as Tesco or Asda.
What yesterday's M&S figures appear to show is that Mr Bolland has retained his magic touch when it comes to selling it. He has more to do if he is to show he is the all-rounder M&S needs. To justify that payment he must get it firing on all cylinders and outperforming across the piste.