Andrey Popov -

Marks & Spencer profits drop as digital push ramps up

Clothing, home and luxury food retailer Marks & Spencer has been pushing to make its business more digital, but its half-year profits have seen a hit

Marks & Spencer has suffered a drop in profits, despite ongoing plans to make the business more digital.

The retailer’s half-year results ending September 2019 saw a 17.1% year-on-year drop in profit before tax adjusting items, from £213.0m in 2018 to £176.5m in 2019.

But the retailer has been implementing several changes in attempt to push forward its digital agenda and catch up with other supermarkets, leading to an increase in online revenue and website traffic.

“Our transformation plan is now running at a pace and scale not seen before at Marks & Spencer,” said CEO Steve Rowe. “For the first time, we are beginning to see the potential from the far-reaching changes we are making.

“The Food business is outperforming the market,” he said. “Our deal to create a joint venture with Ocado is complete and plans to transition to the Marks & Spencer range are on track. Our cost reduction and store technology programmes are on track.”

Website traffic for the retailer increased 8% year-on-year, and a 0.2% increase in online revenue for M&, which the retailer admitted was a lower increase than expected due to issues with “availability and product mix”.

In the future, the retailer is aiming to continue to build its online presence – partially through its upcoming £750m relationship with Ocado – to grow its customer database and develop its customer loyalty programme with the aim of online making up a third of its sales in the UK.

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But other parts of the business have suffered in the past year, with its clothing and home revenue dropping.

The firm put this down to supply chain issues. “In Clothing & Home, we are making up for lost time,” said Rowe. “We are still in the early stages, but we are clear on the issues we need to fix and, after a challenging first half, we are seeing a positive response to this season’s contemporary styling and better value product.”

As well as previously working on its data science remit by partnering with Decoded to teach its employees data science skills, over the past year, the retailer has introduced several digital measures to cater to increasingly demanding mobile-focused customers.

In early 2019, the retailer introduced a photo searching capability to its mobile site to help people find products they might like using external images, such as outfits they have found on social media.

Battery charging banks

To further encourage a move into the mobile space, the retailer also partnered with a startup called ChargeUp to introduce battery charging banks its stores for customer use while shopping.

The retailer also partnered with Founders Factory, a network for entrepreneurs and startups, to gain access to new innovations with the possibility of building new joint retail ventures.

More recently, the retailer announced it would be trialling an 11pm cut-off for free next day click-and-collect delivery – many retailers are pushing their limits when it comes to convenience to cater to fickle modern customers.

It also plans to relaunch its Sparks customer rewards programme in 2020, as a way to promote “greater personalisation and engagement”.

This digital push comes after the retailer admitted its online remit is behind that of its competitors, as well as a recognition that online grocery shopping is one of the fastest-growing channels in the retail sector.

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