Bolland plans clearout of brands as M&S profits rise

Announcing a raft of changes which he described as “evolution not revolution”, Bolland outlined plans to grow its home, online and international businesses, and to open more space in the UK.

Key changes include:

• Increasing the role of the M&S brand in fashion “so it becomes a brand destination of choice in its own right”. The Portfolio brand will be axed and the presentation of other sub-brands will be improved to remove duplication and give them a clearer identity of their own.
• In food, branded lines will be reduced from 400 to 100, and only continue where M&S is unable to develop a best-in-class alternative. However, a further 100 international lines exclusive to M&S will be introduced. Space utilisation in food halls will be improved allowing the number of lines stocked to be increased from 7,000 to 8,000.
• UK space growth will be accelerated so that 95% of the population will be within 30 minutes of a full-line M&S store by 2015. To achieve this, space growth will increase to 3% per annum until 2015/6.
• M&S is to come off the Amazon web platform in late 2013 and develop a new one of its own. A full online food presence continues be examined but there are no plans to launch one at the moment. Web-ordering kiosks will be introduced in stores, and international online capability will be launched in one market in 2011. The company aims to grow online sales to between £800m and £1bn by 2013/4.
• M&S is to segment its home offer and offer a wider choice to encourage more M&S shoppers to shop the category. The focus will be on areas such as kitchenwear, bedding and personal care. The company will withdraw from the home technology market.
• There is no mention of returning to western European markets. Instead the company plans to focus on building leadership in certain priority markets, rather than “planting flags” in many countries. The company wants to achieve international sales of between £800m and £1bn by 2013/4.
• The company is growing the cost savings it aims to achieve from its Project 2020 IT, logistics and supply chain programme from £250m to £300m. It expects a 5% improvement in food availability and a 9% improvement in clothing and home by 2015.
• The plan will require additional capital expenditure of between £850m and £900m. £600m will be spent on the UK business, with £150m each on international and online.

The announcement came alongside a strong set of interim results. The company’s adjusted first half pre-tax profit grew 16.9% to £348.6m on sales up 5.4% to £4.6bn in the 26 weeks to October 2. UK like for likes rose 4.4%, with general merchandise up 6.3% and food up 2.6%. The company said it had gained market share in clothing and food, with clothing up 60 basis points to 11.2%. Direct sales were up 49%, and international up 3.8%. The dividend was increased 12.7% to 6.2p a share.

Bolland said: “The business is in good shape and we have strong foundations on which to build through evolution not revolution.

“We will begin by focusing on the core UK business. For our customers this means that in clothing we will improve our core M&S ranges, so that the unique quality, style and fashion of the M&S brand stand out.  We will also clarify the position of our sub-brands, moving them from labels to real brands.

“In food, we will establish a clear market position as a specialist high-quality retailer, inspiring customers with our unrivalled quality and innovation.  Our focus will be on fresh, speciality and convenience, bringing the Best of British and Flavours of the World to our customers.

“Over the first three years we will also build our multi-channel and international capability.  This will develop M&S into an international multi-channel retailer, making the M&S brand more accessible to more customers around the world.”

• Click here to see a word cloud of Marks and Spencer’s half yearly report.