Reporting a profits slump might not be the way new M&S boss Stuart Machin wanted to get the Christmas trading season underway, however, he is feeling pretty merry about the retailer’s Christmas prospects.
“We’re confident there’s a good Christmas ahead of us,” he says.
Despite many industry indicators showing that shoppers are cutting back and trading down, Machin is sure that it’s shoppers will still pull out all the stops this Christmas.
“Our customers have told us that they’re trying to protect their Christmas spend and are making lifestyle adjustments to ensure family celebrations remain special.
“Christmas food remains their top spending priority and M&S is a brand they can trust to deliver.
“As we go into Christmas, we’re very confident with our award-winning quality and the innovation of our new products with great value everyday.”
He flags that momentum is building across the business as Christmas trading starts in earnest and says sales are up in food, and crucially in its long-suffering clothing and home division.
In fact, over the last half the retailer managed to gain clothing market share for the first time since 2012.
There are, of course, some factors that will help M&S.
People are eating out less, which Machin says is “good news for our food business” while its more affluent customers have “a greater cushion to the current financial squeeze”.
Christmas comes early
The early signs are good – and they are an important indicator of how Christmas will pan out for M&S as shoppers are buying early this year.
In fact, M&S co-chief executive Katie Bickerstaffe says that its customers have already bought about 30% of their Christmas gifts.
“People are planning forward a little bit now,” she says, highlighting the large demand for its Christmas pyjamas.
The current trending search terms on the M&S website are velvet trousers, sequin skirts and partywear suggesting people are also getting ready for Chrsitmas parties.
In food, Machin flags that its Christmas food to order sales were up 200% against pre-pandemic levels over the last few weeks.
Shoppers may want to make Christmas special, but that does not mean they will spend with reckless abandon, and Machin says offering great value will be crucial.
He says M&S is in a great position as it has “sharper value positions” across all parts of its business and is committed to keeping prices keen.
The retailer points out that approximately 30% of gifts for sale this Christmas at M&S are priced below £10, with 70% under £20.
“Early sales indicate we’ve got good products at great value,” Machin says.
In fact, Bickerstaffe points out that in fashion it had overtaken Primark as the number one brand for perceived value for money.
This is in spite of the retailer increasing prices over the past year to offset rising costs. However, it insists it has done so behind the market, with a 8% rise in food prices and a 7% increase in fashion.
Bickerstaffe admits, however, that it will have to “pass-through” more inflation rises as the pound slumps against the US dollar.
Gathering storm
Christmas may be looking merry but M&S sounded a note of caution about the year ahead, with Machin referencing a “gathering storm”.
It’s a sentiment that M&S CFO Eoin Tonge agrees with.
“Next year looks tough,” he admits. “The cost of business is going to get higher because of energy.
“The consumer is going to be struggling with the continued cost of living crisis and higher interest rates. We’ve got to get ready for a tougher financial year next year.”
Machin insists he is confident that M&S’ reinvigorated product offer and strong value for money credentials would “provide insulation” against the stormy condition, however he admits the New Year would be challenging.
“We are trying to brace ourselves, ” he says. “We’re very focused on the early part of next year, where some of these cost headwinds for households will hit,” he says.
With 2023 looking stormy, M&S will need to make the most out of its customers’ Christmas cheer.
