Enhancing Personalisation: M&S CEO Aims to Drive Performance Growth
Marks & Spencer CEO, Stuart Machin, aims to enhance personalization to strengthen performance Investment in style and Sparks development has driven volume growth and heightened customer demand, but Machin believes there is more to achieve on this ongoing journey
Marks & Spencer has reported a surge in profit for the first half of its financial year, surpassing expectations. This impressive performance can be attributed to strong sales growth in both its food and clothing & home departments. Despite these positive results, the company's CEO, Stuart Machin, expressed his dissatisfaction with the progress made in personalization, acknowledging the need for improvement. In light of the overall success, Marks & Spencer has also approved its first dividend payment to shareholders since the onset of the pandemic.
The retailer reported today that food sales for the 6-month period ending on September 30th increased by 14.7% compared to the previous year. Clothing and home sales also experienced a growth of 5.7%. Profit before tax showed substantial improvement, with a 75% increase amounting to £360.2m.
Online sales witnessed a modest rise of 4.6%, contributing to a margin increase to 9%. This improvement can be attributed to a reduction in discounted items and a rise in the usage of the more cost-effective click and collect option. Nevertheless, Machin emphasizes that there is still room for further enhancement of their website and app, particularly in terms of personalization.
During a call with analysts to discuss its interim results, Machin expressed optimism regarding the progress and efforts made thus far. However, he acknowledged a sense of dissatisfaction due to the abundance of untapped opportunities. While the company remains on track, there is still much work to be done, particularly in enhancing online functionality and personalization within the app.
M&S currently holds a 9.2% market share in physical stores for menswear, but this drops to 4.9% online. The situation is similar for womenswear, with M&S controlling 9.5% of the offline market but only having a 4.5% online share.
Machin emphasized the need to improve the app experience and personalization, stating that more effort is required in that area.
There is potential for improvement in its Sparks loyalty programme, according to Machin. Although the company has 18 million individuals enrolled in its Sparks loyalty scheme, only 5 million of them are classified as 'active' users who use the card at least once a month. Machin mentioned that at present, only 20% of Sparks users are participating in the personalization trials, highlighting the need for improvement. He stated, "We are aware that our team has work to do. If we can effectively organize our data for the 18 million people in the programme, it presents a significant opportunity."
Style returns
According to Machin, the company's efforts to enhance the perception of style in its clothing collection have proven successful. He revealed that there has been a 5% increase in overall style perception for womenswear over the past 18 months, while menswear has experienced a 7% rise in style perception.
In September, the brand enlisted actress Sienna Miller to represent its womenswear, aiming to alter style perceptions. Building on this success, the brand has now extended its mission to include menswear, launching its first dedicated menswear campaign in eight years.
Machin emphasized M&S's strong focus on value perception, emphasizing that it's not just about price, but about the quality you receive for that price. He stated that the brand's ongoing marketing campaigns and new product ranges have attracted a growing number of younger consumers.
That change in population distribution, as mentioned by Machin, could also support the growth of its Sparks program: "We discuss the typical customer, whether it's their demographic stage or other aspects... as I observe the customers we are attracting, they tend to be younger. Unless the Sparks program is truly relevant to them, they won't enroll. However, it has the potential to be a significant catalyst in the future," he explained.
Future challenges
The company identified homeware and furniture as an area that needed improvement, specifically focusing on the potential for significant growth in online homeware sales. However, it expressed caution regarding its opportunities for the second half of the year due to reduced margins caused by increased discounting during Black Friday and New Year sales.
Richard Price, the managing director of clothing & home for the brand, is determined to decrease the percentage of discounted items sold, according to Machin. He mentioned that efforts will be made to prevent excessive discounts throughout January and beyond.
The company also acknowledged that it does not expect its ownership of Ocado to have a positive impact on the business in the next few years. They view it as a development that will take three to five years. The grocery delivery business reported an underlying loss of £23.4m for the first half of the year.
