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Marks & Spencer blames website for sales decline Marks & Spencer stands by strategy as investors rail at decline
(about 11 hours later)
Marks & Spencer has blamed problems with its website for its latest decline in sales, intensifying shareholder on chief executive Marc Bolland. Marks & Spencer’s chairman defended the chief executive Marc Bolland from a barrage of hostile shareholder questions, with the objects of the attacks ranging from the retailer’s lack of growth to the use of chilli in its spaghetti.
The high street bell-wether — overtaken by Next in the profit stakes this year — chalked up a 12th consecutive sales fall in its prized general merchandise division, which includes its all-important womenswear offering. Robert Swannell admitted the company had lost its way and could learn from rival Next, whose profits recently overtook M&S’s for the first time.
Bolland blamed the latest decline on the stuttering launch of the retailer’s website, which analysts labelled a “fiasco”. The share price fell 1 per cent or 5.1p to 428.1p. His comments came as the company revealed the 12th consecutive quarterly sales decline at its key general merchandise division.
Chairman Robert Swannell was set to give his full backing to the Dutch boss at the Wembley meeting, but serious problems with the £150 million new website helped push like-for-like clothing sales down 0.6 per cent, and overall general merchandising down a worse-than-expected 1.5 per cent. Problems with the retailer’s website were brushed aside, despite an 8.1 per cent fall in sales contributing to a 0.6 per cent fall in clothing and 1.5 per cent fall in general merchandise on an underlying basis.
The latest decline underlines the challenge faced by M&S’s new UK retail chief Laura Wade-Gery, who has given increased responsibilities last week. Addressing shareholders at the annual meeting at Wembley Stadium, Mr Swannell said: “We are all clear on the strategy and believe we have a strong executive strategy led by Marc that we think will deliver it.”
Bolland insisted the 8.1 per cent fall in web sales was due to a “settling in” period but admitted turnover on the site would not recover until Christmas. He admitted that general merchandise sales had failed to meet expectations, but pointed to its rival for inspiration.
He said: “It is not an issue with the website. The conversion [turning online visits into sales] was expected to be lower because we brought a lot more [editorial] content, but it is now a lot more inspiring. It’s a journey and I’m pleased with the journey.” “We need to do a… step by boring step approach so we are consistent too. That’s what Next have done and why their shares have been one of the best performing in the sector.”
But analysts were scathing. Neil Saunders at Conlumino said: “After the significant investments made, a result of very negative sales over the past three months is highly disappointing, especially since this part of the market is witnessing growth in double digits.” However, shareholders were not convinced. One investor said: “Every AGM… your promises have filled us full of confidence for the forthcoming year, only to return a year later full of disappointment. The share price is still languishing where it was over a decade ago. Why should we now believe that your ambitious plans will bear fruit this year? I think you’ve lost sight of the job of a retailer.”
And Clive Black, retail analyst at Shore Capital, said: “The dot.com fiasco — and that is what it looks like, noting as we do many more complaints over praises for the current proposition — leaves a bitter taste for investors, to our minds.” Serious problems with the new, £150m website helped push like-for-like clothing sales down, and the latest decline underlines the challenge faced by M&S’s new UK retail chief, Laura Wade-Gery, who was promoted last week.
M&S has struggled with encouraging customers to re-register with the new website. Bolland said 3.2 million of the six million who had previously used the old site had moved across. Mr Bolland insisted she was not leapfrogging the current food and general merchandise chiefs – Steve Rowe and John Dixon, respectively – and they would all report direct to him. He added that the decline in web sales was due to a “settling in” period, though he admitted that the site would not recover until Christmas. Analysts were scathing. Clive Black at Shore Capital said: “The dotcom fiasco leaves a bitter taste for investors, to our minds.”
He was also unable to say when general merchandising or womenswear sales would return to positive territory. M&S has struggled with encouraging customers to re-register with the new website. Mr Bolland said 3.2 million out of 6 million had moved across.
But Bolland also revealed that despite a fall in clothing sales, M&S was selling more full-priced items and was weaning itself off high levels of promotions. Among the difficult questions there were several lighter ones, with one shareholder asking for the Twiggy range to be available in stores, another asking for longer shirts to cover women’s stomachs better.
At the food division, sales continued to impress, up 1.7 per cent, helping total group sales rise 2.3 per cent — and a sign that shoppers are not being enticed away from its food halls to discounters Aldi and Lidl, unlike its supermarket rivals. And despite a tough crowd, all resolutions passed.