More Space than is necessary (M&S)

Yesterdays (admittedly quarterly) results at UK retail giant has, according the guardian (link), spooked investors.

M&S Holloway Road — opened in 1931

One one hand they managed to stem the decline in clothing sales, although -1.2% is still a decline right? The wheels may have fallen off their food juggernaut with sales roughly flat, although truth be told the gloss was cracking on the food business before yesterday — see infographic and great overview here (link). The best tidbit from Steve Rowe is that the new store openings are impacting on previously opened stores. This is basic retailing — you put stores in places where you have a ripe target audience and no existing stores. I think M&S have two main food shoppers — the office worker who picks up lunch / dinner around their workplace, and the occasional / top up grocery buyer who would travel to M&S to pick up groceries — not weekly or daily, but for a posh Saturday night in, or a family BBQ or picnic. The big worry here, is what happens when they launch an on-line food offer. Will that second group stop going to store, what impact will that have (at least initially) on like for likes? You have to say that understanding the impact of the on-line offer should be the main priority of the food team right now.

I also think the store estate is part of the wider problem. M&S has too much floor space, in the wrong place, selling the wrong things. This week I went to my local M&S on Holloway road, and found that store felt understocked, with too much room around the departments (a complete contrast to the late days of BHS when their stores where stuffed to the gunnels with stock no one wanted to pay full price (or even half price) for). M&S built most of its estate over the last 80 years, and many stores are custom built temples in what was once prime retail (like BHS). Its really hard to split these stores as they are purpose built department stores with lots of space (not only on the ground floor). The sell off has started (link), but has to be the start of a wider and more aggressive shift from high street to on-line.

It will be interesting to see what happens next quarter, but my sense is that action needs to be taken sooner rather than later.