Marks and Spencer: Under pressure to deliver - Business Analysis & Features - Business - The Independent

Marks and Spencer: Under pressure to deliver

Boss Marc Bolland hopes a new distribution centre and fashion ranges will reverse the retailer’s fortunes, says James Thompson

When Marc Bolland opens Marks and Spencer’s fashion show at a swanky venue in London on Tuesday night, the bright lights may lead to beads of sweat on the Dutchman’s forehead. The chief executive of M&S may also perspire due to feeling the pressure of unveiling its autumn and winter collection, which has already been widely billed as make or break for Mr Bolland after seven consecutive quarters of falling clothing sales.

Patience among some investors, such as Standard Life, appears to be wearing thin and if its dire trading in fashion continues after the latest ranges start to land in the summer then Mr Bolland could be a marked man by the time of its half-year results in November or Christmas trading statement in January.

The former Heineken executive will not have envisaged presiding over clothing and homewares sales down by 3.8 per cent in its last quarter, a second consecutive year of falling profits and a revolving door among senior executives when he took the helm three years ago. Ahead of this week’s fashion show, Mr Bolland had the less glamorous task of taking analysts and press round its massive new e-commerce and national distribution centre in Castle Donington in the East Midlands three days ago.

But the automated 900,000 square feet facility – the size of 11 Wembley football pitches and 25 metres high – will have a far more significant impact on the retailer’s long-term future than two seasons of clothing. 

M&S directors pulled no punches on Wednesday in lamenting how it had “under-invested” in its IT systems and logistics for more than 20 years.  Alan Stewart, its finance director, said: “Overall, we have a slow and expensive supply chain with poor availability and this represents a big opportunity for us.”

To exploit this opportunity, M&S is investing £1bn over the six years to 2016 in its technology and supply chain, in an effort to drag it into the 21st century and realise annual benefits of £300m. For instance, M&S had 110 regional distribution centres in 2009 but plans to have just three by 2016 in Bradford, Castle Donington and the south-east. Along with sourcing efficiencies, the retailer’s new distribution network aims to slash its costs by 40 per cent and reduce delivery times from ports to shops by 70 per cent.

Since 2010, the upgrade of its food systems has already delivered a 3 per cent uplift in product availability on its shelves and it is targeting a 9 per cent improvement for its clothing and homewares. Such an outturn over the next three years would see investors doing cartwheels.

For e-commerce, the masterplan centres on two key areas: M&S moving off the Amazon platform next year on to its own, and the Castle Donington facility, which is a high-tech labyrinth of cranes, conveyor belts and computer systems. The cavernous warehouse will be able to process 1 million items a day – 300,000 from its website at peak – and hold nearly all its non-food inventory for online in a single location.

Laura Wade-Gery, the head of e-commerce at M&S, said: “This [Castle Donington] is an enormously important milestone for our e-commerce business and our plan to be a leading multi-channel retailer.”

M&S said surveys showed that only a relatively small proportion of customers ranked it as “excellent” for its online stock availability and delivery service. Ms Wade-Gery, the former online chief at Tesco, said: “E-commerce has become the cuckoo in the business nest. It has outgrown our business infrastructure. Our delivery proposition and availability is not as good as customers would like.”

Its contract with Amazon, which expires next year, has not only restricted M&S’s ability to sell overseas but also the functionality required for a clothing website. Mr Bolland said: “We have to be agile and flexible as this world is changing.”

But online still only accounts for 15 per cent of M&S’s total sales, compared with about 35 per cent at rival Next. The 129-year-old retailer is targeting web sales of between £800m and £1bn by March 2014 but rival John Lewis said last month its annual online revenue had already smashed through the seven-figure barrier.

A key part of M&S, which has more than 700 UK stores, moving to a “market-leading” online service will be the launch of next-day delivery over the next 12 months and ultimately same-day delivery. It currently delivers to customers within three to five days, although shoppers can pay a premium of £4.95 to get goods the next day if they order before 7pm.

However, for all this to work, M&S needs to unveil clothing ranges on Tuesday that consumers, particularly women, en masse want to buy. Following Mr Bolland putting in a new clothing team in October, the autumn and winter collection will be the first delivered by John Dixon, the M&S lifer and head of general merchandise, and Belinda Earl, its style director and former chief executive of Jaeger.

Maureen Hinton, the director of research at Verdict, says: “Because they are the market leader and have so many stores, M&S have to appeal to all women. The problem at the moment is that they are only appealing to a relatively small number of its older, loyal shoppers.”

Despite the hype around next week’s event, the feeling is that Mr Bolland will be given time to turn around the M&S tanker, although calamitous summer and autumn trading could have investors sharpening their knives. Indeed, M&S, which has more than 400 stores in 44 countries overseas, is still forecast to have delivered pre-tax profits £658m over year to March, although this would be a 7 per cent decline.

More positively, the food business, which accounts for more than half of group revenue, has thrived and posted underlying sales up by 4 per cent in its fourth quarter. This represented its 14th consecutive quarter in positive territory on food.

Sources also believe that Robert Swannell, the chairman of M&S, is a cautious and conservative chap who is unlikely to wield an axe in the boardroom unless investors put a gun to his head, which does not seem on the cards.

Clive Black, the analyst at Shore Capital, says: “I don’t think Marc Bolland is under special pressure and I think he puts as much [pressure] on himself as outsiders do. That said, the heat will rise if the autumn and winter ranges flop.”

Castle Donington: From rock to groceries

In the 1980s and early 1990s, Castle Donington was best known for the Monsters of Rock concert, where legends, such as Van Halen, Ozzy Osbourne, Mötley Crüe (pictured) and AC/DC banged their heads. Since then, the village has not had much to celebrate, but Marks & Spencer this week changed the music by unveiling plans to create more than 1,500 jobs at its huge new distribution centre there.

This is particularly positive news for disabled people and the long-term unemployed, as M&S has vowed to recruit a third of the facility’s staff from these backgrounds.

This recruitment policy at Castle Donington with Remploy builds on the long-term work M&S has done with the same specialist employment agency to hire staff in its stores. The retailer’s executives said they were “proud” the facility in Castle Donington was providing work to people, such as a man who had been unemployed for more than 15 years.

Marc Bolland, the chief executive of M&S, said: “As we are recruiting a significant proportion of employees through our Marks & Start Logistics scheme for people with disabilities, this investment in the UK is a unique combination of state-of-the art technology and a great social working environment.”

Life and Style
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Arts and Entertainment
Matt Damon as Jason Bourne in The Bourne Ultimatum (2007)
filmMatt Damon in talks to return
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Life and Style
tech... and together they're worth at least £100 million
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig is believed to be donning skies as 007 for the first time
Arts and Entertainment
Fringe show: 'Cilla', with Sheridan Smith in the title role and Aneurin Barnard as her future husband Bobby Willis
tvEllen E Jones on ITV's 'Cilla'
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Bono and Apple CEO Tim Cook announced U2's surprise new album at the iPhone 6 launch
tech(but you can't escape: Bono is always on your iPhone)
Tim Wiese
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week