Digital channels thriving for M&S but profits down

Some of Marks and Spencer’s (M&S) digital propositions have been growing over the past year, the retailer has claimed in its full-year report covering April 2022 to April 2023.

M&S said its click and collect service had grown, alongside an increase in active users of its mobile app and Sparks loyalty programme.

But its profit before tax saw a 7.8% drop year on year (YoY), from £522.9m in April 2022 to £482m in April 2023, which the retailer put down mainly to ongoing transformation.

M&S CEO Stuart Machin said: “Sales were up in-store and online, supported by growth in click and collect sales, active app users and Sparks loyalty membership, demonstrating the emerging power of our omni-channel model.

“The store rotation and renewal programme delivered strong sales uplifts and will accelerate this year, including the opening of five brand-defining full-line stores in major cities. Our disciplined approach to capital allocation means we can invest for growth, while further reducing net debt and maintaining investment grade credit metrics, and we plan to resume dividend payments at our interim results.”

Profit may be down for the retailer, but sales are up year on year both online and offline – store sales were up 14.9% year on year and online sales were up 4.8%.

In the past, M&S has had a reputation for quality food over anything else, but in the past year, its clothing and home sales have performed well, increasing by 11.5% year on year.

But the Ocado Retail arm of the business saw a drop in revenue in the period, with M&S claiming this part of the business is undergoing a “reset” to improve customer experience and operating costs.

Sales for Ocado Retail were down by 1.2% year on year, despite an increase in active customers. M&S put this down to people shopping less frequently now the pandemic has subsided, though a common trend in the current economic climate is reduced retail volumes and increased retail spend as a result of the rising cost of living.

M&S mentioned having undergone “a number of years of substantial change and investment” to work on developing a number of parts of its business, including its omni-channel proposition, partly achieved through its partnership with Ocado.

In 2019, M&S and Ocado entered a deal by which M&S took a 50% share of Ocado’s UK retail business with access to the Ocado Smart Platform. It went on to give customers access to M&S-branded goods when ordering online from Ocado.      

But this isn’t the only venture M&S has undertaken to increase efficiency and reduce costs over time.

Last year, M&S announced the acquisition of Gist to help modernise and cut the cost of running its supply chain. It also claimed to have worked to “streamline” its digital, technology and support centre functions.

While it also plans to make investments over the next year in projects such as an order planning system for clothing and home products, and a forecasting and ordering system for food products, the retailer said the costs of these investments would be offset in other areas.  

“One year in, our strategy to reshape M&S for growth has driven sustained trading momentum, with both businesses continuing to grow sales and market share,” said Machin. “The benefits of the Gist acquisition and operational efficiencies also supported an improved performance in the second half [of the year].”