James Moore: Food saves Bolland's bacon as M&S counts the cost of a Christmas flop
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
Wednesday 11 January 2012
Outlook 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 from the retailer's food offering. 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 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 M&S's business. That's the reason 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 – 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're 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 (MPC). Those forecasts of a fall in UK 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, although 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 UK's 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 figures from M&S 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 that he is the all-rounder that M&S needs. To justify that payment he needs to get M&S firing on all cylinders and outperforming across the piste, however "challenging" the environment is.
- 1 Barbarians vs Samoa interrupted by sprinklers as fans criticise lack of Wi-Fi and poor seating at West Ham's Olympic Stadium
- 2 Caitlyn Jenner car crash: Driver who died in collision sued by surviving passengers for $18.5m
- 3 Watch the Supermoon live: How to see the brightest Moon of the year tonight
- 4 Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
- 5 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Caitlyn Jenner car crash: Driver who died in collision sued by surviving passengers for $18.5m
Celebrity Big Brother 2015: Tila Tequila kicked off show after 'describing Hitler as a good man'
Watch the Supermoon live: How to see the brightest Moon of the year tonight
Hulk Hogan wants to be Donald Trump's running mate in the US Presidential election
Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Tony Blair attacks Jeremy Corbyn's 'Alice In Wonderland' politics
Stock up on canned food for stock market crash, warns former Gordon Brown adviser
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...