The acceleration of its turnaround plan comes in the wake of the announcement that finance director Helen Weir is leaving the company to “pursue a plural career”. Weir, who has been with M&S for two years, will stay until a replacement is found, but her departure suggests Archie Norman, the retail turnaround expert who became chairman in the autumn, is making his presence felt in the boardroom.
The retailer also reported underlying pre-tax profits of £219.1m for the six months to 30 September. Like-for-like food sales were down 0.1%, with profits margins squeezed by input inflation as the weakness of sterling pushed up sourcing costs. Underlying clothing sales were also flat, which was a better outcome than many analysts had predicted.
Shares fell 2% after the update.
In recent years M&S had focused on the expansion of its upmarket food halls as its clothing arm struggled. But Rowe said it now faced “stronger headwinds” in food, including online competition, which needed to be addressed. It had previously announced plans for 200 new Simply Food stores by 2019, but said that would now be slowed down.
“The headwinds facing our food business have intensified as competitors have encroached on some of our space with the rapid growth of convenience,” said Rowe. “Hard-pressed consumers are more aware of value and are careful about premium choices. Therefore, although our investment returns remain high, we are slowing our Simply Food opening programme as we reposition our food offer for future growth.”
Rowe, who took over the top job last year, is seeking to revive the fortunes of the 133-year-old retailer whose profits have dipped in recent years.
Last year, M&S announced it would close 30 stores to reduce the amount of shopfloor space devoted to its struggling clothing arm by 10%. A further 45 would be downsized or converted into food-only stores as part of the five-year plan, it said.
M&S did not spell out what the acceleration of this plan would entail in the short term, but Rowe said “we are working through this on a store by store basis”.
The company said it was “undertaking a significant review of its cost base with the aim of generating a substantial reduction in legacy and structural costs”. One of M&S’s biggest costs is its large store network. Rowe said the plans could result in cost savings of about 10%.
The performance figures comes amid fears of a tough festive season looming on the high street after the British Retail Consortium revealed a 1% fall in like-for-like sales in October. John Lewis, Next and New Look have all reported poor trading.
Rowe said that while the market had been tough in October, partly because the weather had been warmer this year, he was “quite pleased” about the start to Christmas trading.
“Our customers are telling us they are looking forward to Christmas,” he added.
M&S’s 2017 Christmas advert features Paddington Bear as part of a festive campaign that combines in-store events, cuddly toys and a charity tie-in.
Neil Wilson, senior market analyst at ETX Capital, said the real test for the retailer would be the key Christmas trading period.
“Paddington needs to deliver. From the [first-half results] statement, however, it is unclear what exactly management thinks in regards to Christmas and this could be a sign of nervousness about the slacker consumer market,” Wilson said.