Unfortunately, its large Clothing & Home business is grappling with a sudden, and perhaps irreversible change in clothing tastes. Formal outfits and tailored clothing are on the way out, and that shift packs a particular punch for M&S. Not only was its bread-and-butter offering the first thing to fall out of fashion in the pandemic, but its online business was slow out the gate.

Looking back to pre-pandemic times, Clothing & Home online sales were flat in the 2019/20 financial year. Compared to the 23% increase Zara owner, Inditex, achieved that year, it gives a sense of M&S’ less competitive position.

The division’s struggles have a lot to do with its previously antiquated buying processes, which meant judgements about what would be popular were made at the start of a fashion season. More agile models better track what’s flying off the shelves in real-time, meaning inventory levels can be better controlled.

Those brand-specific challenges, coupled with lockdown store closures meant M&S’ full-year numbers made for tough reading. Including costs associated with restructuring efforts and redundancies, the group reported a pre-tax loss of £201.2m.

There are some sparks of resilience though. M&S is renowned for its basics, including lingerie and nightwear, which is a real asset in today’s home-centric world. Trading in the first few weeks of the new financial year has got off to a great start, and there seems to be some tentative positivity coming down the pipes.

We've been particularly impressed with the stronger-than-expected sales of spare stock from lockdowns. In fact, because the group sold more left-over stock than expected, it was able to put almost £91m back into the company wallet. Those funds were released from the provision put aside for the cost of excess inventory.

Looking ahead, the group’s Clothing & Home inventory should remain healthier. Part of its strategy shift includes a more up to date test-and-repeat stock system. That means it should be able to stock fewer items, and the right ones at that. It’s also reduced its available ranges, and we think focussing on a smaller number of lines is the right thing to do. From here, we’ll be watching inventory closely – quicker inventory turnover is a real positive in today’s retail industry.

The food business is also faring well, and the underlying picture suggests the offering is holding its own among the bigger players. Excluding franchise and hospitality sales, which have been badly dented by the pandemic, food like-for-like sales rose 6.9% last year. The food business offers genuine opportunities, especially after the hard work that’s been done on improving customer perceptions of value for money. Even more crucially, M&S food has a unique selling point – something the likes of Tesco and Sainsbury’s can’t really say. Savvy marketing and its convenience store format next to offices means M&S items are viewed as higher quality than the average food shop.

Progress has been helped by the joint venture with Ocado, which means M&S can ride the wave of increased online grocery shopping, which is something it would have previously been forced to watch from the sidelines. Grocery spending patterns are starting to normalise, and basket sizes are growing. All-in that helped bulk out Ocado’s performance and M&S' share of pre-tax profit from the business was £78.4m last year.

Coronavirus has caused the group to speed up its modernisation and restructuring efforts too. More of the business is being dragged online, and management structures and the store estate are being streamlined. Over 8000 roles were cut last year, and another thirty stores are to close. The to-do list is endless, but there are tangible signs of progress.

Efforts to downsize the International business are commendable too. The group has previously had a meaningful international footprint, with stores everywhere from Prague to Hong Kong. But the division had been struggling, and the group’s doubled down on store closures and upped the online businesses.

Cashflow is looking healthier, this is partly thanks to more agreeable payment terms with Clothing & Home suppliers, as well as substantial cost-saving efforts. Getting the cash flow statement and balance sheet in order will mean dividends can return sooner, although in our view these are still unlikely in the near term.

For all the good news, to say the challenges are over would be a gross misstatement. This isn’t the first time Marks & Spencer has tried to rejuvenate its operations. We wonder if the all-hands-on-deck approach will be enough to protect against the swelling tide of changing shopper tastes and habits.

Realistically, in a decade’s time, will there be enough footfall to service even the smaller store estate? It’s true the group’s focussing on more resilient out-of-town retail park locations. But we wonder if M&S’ key demographic will follow. Shoring up sales in less traditional locations will require a near-perfect execution of efforts to refresh and restore the clothing brand image.

The turnaround also comes with risk, because of the huge amounts of money and high-scale change involved. If things don’t go to plan, the share price could suffer. The risks involved aren’t necessarily reflected in the current price to earnings ratio of around 12, which is broadly in line with the ten-year average.

Ultimately, the picture for Clothing & Home remains very tricky. The work being done to streamline the store estate and drag more of the business online must be applauded, but it’s too early to call if these gargantuan efforts have simply come too late. There are some genuine opportunities, but there’s a chance the profit and cash outflows that come with the turnaround stretch further into the future than M&S is planning for.

Pat Lynes is a business transformation expert, Founder and CEO of Sullivan & Stanley and the author of ‘The Interim Revolution’. Below he what disruptive technology can mean for companies like Marks & Spencer.

If it wasn’t apparent that there’s a desperate need for businesses to build a strong transformation ability, then surely a monster like M&S - a top five retail brand - closing 100 stores will help the business world wake up. The unprecedented disruption affecting Britain’s big players is going to have a lasting impact on our high streets and for M&S to maintain the market dominance it’s enjoyed over the last century, it needs to act fast and act now, getting closer to what customers really want and need.

Vertically-focussed, digital native businesses are disrupting retail sectors one by one. M&S maintains an uncomfortable spread across sectors and hasn’t moved with the times. To be a successful bricks and mortar company today, you need to create a retail theatre in a tightly focussed number of stores. The M&S in-store experience hasn’t evolved with the times and its outlets have started to lack character. They need to be revamped to excite customers while also supporting the ecommerce sales funnel. M&S should be looking at its physical spaces in a different way and should start building a fundamentally new business model harnessing tech.

While the business needs to make changes to its physical stores, it also needs to reposition its brand to appeal to a broader demographic. Its customer base is ageing and the long-term plan needs to speak to a new audience. The non-food offering isn’t relevant to gen-Z and it needs to work on that. For fashion to stay part of the business it’s going to have to change what it’s doing, otherwise it should forget it and double down on food.

To keep up today, our big corporate businesses need to be thinking and acting like the start-ups that have arrived to shake things up - by injecting agility into their teams. Usual methods of creating change aren’t working; management consulting models aren’t designed to get businesses out of the problem and leaders haven’t time to recruit perm people. The game has changed from ownership of talent to access to talent.

To act nimbly like their competition, companies need to be working with interim business executives - a SWAT team of specialists in transformation that can be parachuted in to work with senior members of staff. They will crowd around a problem to offer objective insight and help to create a culture of innovation and agility within the company. Transformation has become the norm and businesses need to embrace a culture of change to stay relevant. Interim teams can help them move quickly enough to make the changes that will keep them relevant for the next 20 years, rather than the next five. Failure to act at speed will result in failure overall.

Recent news reports regarding Marks & Spencer’s shop closures have left other high street retailers feeling fearful about profits.

With plans to close 100 stores by 2022, in what M&S bosses are calling a re-organization of the entire retail chain, the aim is to turn a third of its in-store sales into online sales.

This of course is another blight in the midst of a global retail infection, predominantly caused by the propagation of online buying. Below Finance Monthly hears Your Thoughts on M&S’ shop cuts and the potential consequences across the UK.

Joe Rabah, Managing Director for EMEA, RMG Networks:

With the recent announcements that M&S is said to close 100 stores and that House of Fraser could close up to half its stores, it’s no secret that the UK high-street is under pressure as a result of changing shopper behaviour and a drastically altered customer journey.

For retailers to survive and adapt they must embrace technology to create meaningful, immersive retail experiences. However, it’s not enough for retailers to invest in technology without doing so in a purposeful manner and knowing the solutions that they invest in are going to be specifically relevant to their business and their customers. It’s essential that retailers use platforms that create frictionless purchasing experiences for their customers, enabling them to increase customer engagement that is tailored to individual customer needs and habits. In doing so they will drive customer loyalty and provide consistent cross-channel experiences. Today’s solution is not tomorrow’s in retail, and technology can either allow a brand to pivot so that it can adapt quickly to changing customer expectations, or it can lock a brand into delivering stale customer experiences.

While we don’t know what the future holds, retailers must understand whether the technology they are investing in suits a clearly defined purpose and is adaptable enough to suit their future needs and their customers’ evolving customer expectations, and consider this before making any technological investment.

Julian Fisher, CEO, Jisp:

With retailers, such as Marks & Spencer, facing large declines in high street spending as consumers turn to online shopping, bricks and mortar stores must evaluate how they are interacting with customers. We are a nation of shoppers and shopkeepers, but convenience is a key factor in driving potential instore customers online where they have access to a wealth of information, deals and personalised offers. To keep customers in stores, the high street shopping experience must provide this instantaneous access to information and personalisation through handheld devices. It is essential that retailers increase investment in areas such as mobile technology to bring the shop floor into the 21st century.

The restructuring decisions that Steve Rowe is making will have the desired effect with these future-thinking closures a controlled choice with M&S in charge of its own destiny. Customer service and quality of merchandise has been a hallmark of M&S for years.

Looking ahead, it will be innovation and the ability for stores and their staff to connect and personalise their brand with new customers who are armed with devices and a world of information and content. If they don’t they may succumb to the fate of others who have been unwilling to embrace changing consumer behaviours.

Iain Wells, Investment Manager, Kames Capital:

Will M&S shares be up or down tomorrow when they announce their results? I don’t know. Expectations are certainly low with earnings forecast to be down nearly 10%. The bad weather in the first quarter, that kept shoppers at home, has been so widely discussed that it can surely provide no negative surprises. With a dividend yield of 6.3%, and a price earnings ratio 9.8x, results that are in-line with expectations could see the shares rise.

While the share may rise on the day, more important is what evidence there is that the structural pressures that have impacted M&S over many years are easing. On this I am less confident. It is not that M&S is a “bad” retailer, just that the retailing world is changing around it faster than it can adapt, and the process of adaptation is painful for shareholders.

The key issues that M&S are trying to address include:

• Too many stores - too much is of the wrong size or in the wrong location. Addressing this is usually costly
• The increase in competition, particularly in clothing, and much of it from on-line players
• The shift to on-line which puts downward pressure on the store profitability, even if the on-line sale is made by M&S rather than a competitor
• Competitiveness of the food offer. With much of the growth of the business centred around food getting this right is crucial.
• Stabilisation/growth in market shares

Everyone has a view about M&S, what they are doing well, and what they are doing badly. As a national institution management have the misfortune of having to carry out their plans on a very public stage.

Terry Hunter, UK Managing Director, Astound Commerce:

The news of the M&S store closures is yet another dagger in the heart of the British high-street. The retailer plans to move a third of its sales online, and intends to instead have fewer, larger clothing and homeware stores in better locations. If the company is going to recover from its recent sales slump, it is imperative that it has an exceptional online offering. It will now be competing more directly than ever with the likes of Amazon and Asos.

Online retailers like Asos take advantage of efficient and nimble business models by avoiding the costly overheads associated with running bricks-and-mortar stores and as a result, they can afford to invest a great deal in offering websites which give the best possible user experience. Although M&S is cutting back on some of these overheads, it is not as experienced or effective in the ecommerce arena as the pureplay online retailers. M&S needs to make sure its in-store offering works in harmony with its online strategy. The retailer struggled over the Christmas period last year – basic logistical errors caused a real headache as next day delivery targets were missed – a type of error you don’t see the likes of Amazon making. A truly omnichannel approach is the only way that this British retailer is going to recover, let alone flourish.

One factor that is working against M&S is that its customer base has an ageing demographic. The company has been making efforts for some time to attract a younger shopper and an improved online offering could potentially aid this. A younger tech-savvy shopper is more likely to make purchases online rather than instore. One of the key battles for M&S will be ensuring that its predominantly over-50 female shopper continues to visit the new stores, whilst also becoming more active in buying products from its website. It is a difficult road ahead.

Paul Fennemore, Customer Experience Consultant, Sitecore:

M&S faces a similar challenge to many other retailers – in trying to find out exactly who its target market is, and what they want, ahead of them wanting it. Evolving a customer experience strategy on the basis of anticipating needs in this way will require a very sophisticated, multi-channel, cross platform customer experience strategy in place, each of which must feed the other to create a total experience that is worth more than the sum of its parts.

One way it could go about reinventing itself online is to go beyond personalisation – which all brands claim to be able to do – and move to individualisation. This will deliver content to its customers based on specific data points. This will help set it apart from the other online retailers, and help it provide its customers with an unexpected, satisfying experience which will keep them coming back.

By creating a robust individualisation strategy, focusing on customers as individuals, rather than using the more traditional broad personas, M&S will be able to attract a younger, mobile-first demographic, who value individual interactions with brands. The challenge here will be to ensure that experience is consistent across all channels, including mobile, online, social media, and in-store. Integration of its systems will be key for M&S going forward, otherwise customer data will be siloed, meaning they won’t be able to track a customer’s journey efficiently. This will ultimately lead to a worse customer experience, as it won’t be consistent.

Ben Holmes, Head of Display, Samsung UK:

Yet again, we’re seeing more boarded up shop fronts on the British High Street with M&S recently announcing a series of store closures. We understand the predicament M&S is in as it sets about ‘modernising’ its business to ‘meet the changing needs of customers;’ but at the same time, we do believe that bricks and mortar establishments can be part of the modernisation effort rather than being the sacrificial lamb to more investment in online. When every retailer is battling for the same pound spent, businesses definitely need to be more innovative in how they sell to their shoppers. The old rules no longer apply when it comes to in-store retailing in an age where shoppers expect personalisation, digital connectivity and high impact experiences. We’d encourage retailers to experiment with digital technologies like video walls and touchscreen kiosks because these technologies have been proven to drive engagement and sales. Physical stores are definitely not secondary to online retail estate because there is a real opportunity for companies to transform their stores into experiential destinations – think brandship not just flagship. Until retailers start delivering genuine, digital experiences, we can unfortunately expect more casualties.

Adam Powers, Chief Experience Officer, Tribal Worldwide London:

This latest announcement is yet another indicator of a malaise that’s been hanging over UK retail stalwarts for the past few years. The inexorable growth of online commerce means that a strategic rethink must be undertaken for businesses that want to successfully trade on the UK high street. Actually, this is a global challenge, but the UK is one of the most advanced ecommerce markets in the world and so we are seeing the outcomes here earlier. Like Mothercare, M&S is clearly trapped in the middle of a market where they are being squeezed at both ends. Cheaper or more fleet-of-foot competitors are doing product innovation around food (Aldi/Lidl) that was once an M&S sweet spot. Away from food, key competitors have high performing home delivery infrastructure like Next or ASOS that leave M&S looking lumbering and out of touch with modern customer expectations. Additionally, M&S are getting squeezed from the top as style needs for their target demographics are increasingly met by internet optimised clothing competitors. The wrapper around all of this is really customer experience - online and instore, this is the modern retail battleground. From the outside looking in, it appears that nobody at M&S is looking at customer experience holistically, with a mandate to drive radical, customer-centric transformation and the initiatives underway, such as store closing, look piecemeal. What’s particularly worrying about M&S delivering a turnaround, is that the way things are emerging must be highly unsettling for the workforce, the very people who are at the frontline of delivering customer experience.

John Taylor, Co-CEO, Duologi:

The internet has made it easier than ever before for customers to compare prices and shop around online, without ever having to leave the comfort of their homes. This subsequent decrease in footfall to the high street has led to a number of high-street brands opting to close stores where footfall has dwindled to save on overheads, with M&S being just the latest example of this.

However, this does not mean that the high street is dying – far from it. Rather, we’re seeing a shift in the retail landscape, wherein the retailers set to thrive will be the more flexible, agile brands which can offer customers a choice in how they shop and pay for products.

To accomplish this, savvy smaller retailers are taking the time to optimise their online presence to sit alongside their bricks-and-mortar offering, engaging customers who no longer shop with a brand due to ongoing store closures.

This flexibility also extends to the payment process itself. With consumer confidence currently low, flexible finance options such interest free credit, 0% finance and buy-now-pay-later can support shoppers at the time of purchase – particularly for big-ticket items – which can both engender consumer loyalty and increase average basket values.

Charles Brook, Partner, Poppleton & Appleby:

We should be careful not to jump to conclusions. There is undoubtedly an acceleration of change in the retail market with some large towns experiencing retail depletion more than others. Statistics released this week in Yorkshire put Doncaster, Barnsley and Huddersfield towards the top of those hit hardest by a combined net loss of more than 1,000 retail outlets in the past 12 months.

Marks & Spencer is shifting the focus of its in-store offering away from homewares and clothing to place emphasis on and serve its online offering in a more contemporary manner. This is a sensible response to the evolved way in which even its traditionally conservative-minded customers now shop and, having such a significant leasehold estate, and it needs to plan well ahead. I think it highly unlikely that M&S would try to foist a Company Voluntary Arrangement on its landlords.

Perhaps this is a good time to deliver seemingly bad news. The M&S Board may be gambling on the market and its major shareholders (if not the public at large) recognising that whatever issues have hit other big names, M&S is reading the trading conditions and charting its future trading strategy with typical caution.

Rick Smith, Director, Forbes Burton:

Retail is going through a transition, and a transition that M&S should have seen coming, especially with the likes of Ebay / Amazon etc dominating the way people shop, but unfortunately for all those concerned (towns, cities, the high street, communities, shoppers, staff) they didn’t. High street shopping is now all about the experience.

However, it’s not just the blue-chip retailers fault, it’s a collective from councils, property owners and communities. This should have been recognised and adaptive investment should have been put in place a long time ago. The problem we have now is that it’s all knee jerk and I’m not convinced they are going about it the right way. Closed high street shops is simply demoralising for the community and once the reality of it sets in it’s quite scary when you start thinking more about it.

M&S haven’t kept up with the times and they need to look at online sales especially for the struggling clothes and homeware sections. While they’ve been able to do well compared to their competition by attracting females to their clothing range, they have failed to find their proper place in the market on this side of the business and need to get this totally right. Also, many of the stores need modernising which is difficult when profits are dropping and there’s no money for investment.

Their food range is nice and appeals to a small, specialised section of the population. However, competitors have caught up with their food offerings and often for much less with most now doing a ‘finest’ or similar range. A small percentage do also believe the bad press around packaged meals, and this combined with the offerings from the competitors has had a knock-on effect because there has been no differentiator in terms of quality. M&S food is of very good quality, but it is now evident with these closures that they do not have the resources to convince the public otherwise.

Emma Thompson, Head of Strategy, Visualsoft:

E-retail is booming at the moment, with consumers currently spending a staggering £1.2 billion a week online. As such, high street retailers need to make the most of this opportunity to ensure they have the best chance of success. Those who fail to do so can expect to fall behind more digital-savvy competitors, as we have seen with the likes of Toys ‘R’ Us and Maplin.

While it still remains to be seen whether Marks and Spencer’s store closures will help boost performance, it is heading in the right direction by using this restructure to support the growth of its website. This forward-thinking attitude could see the retailer maximising its growth potential, as the majority of the UK’s top retailers that neglect their online offering risk stunting their growth as a result.

For Marks and Spencer to effectively focus its efforts, it needs to not only improve its website’s user experience, but also utilise a variety of online channels to boost revenue. Social media in particular should be a priority, given that a growing proportion of e-retail sales are driven through the likes of Instagram and Facebook. If the retail giant prioritises these areas, it can expect advantageous results to follow.

Leigh Moody, UK Managing Director at SOTI:

The decision to close 100 stores over the next four years is a bold decision from one of the UK’s leading retailers and highlights the shift in focus from high-street to online in order to keep up with evolving consumer trends.

In response to this change and to support its online growth plans, M&S will need to consider how they integrate their mobility management strategy across their entire on and offline operation to ensure they are streamlined, data is protected and customer demands are met.

As M&S becomes more digitally enabled across all channels including mobile and social, mobility will be key in influencing the shopping experience, touching every part of the value chain which in turn, will lead to further opportunities for cost savings and buying efficiencies.

We would love to hear more of Your Thoughts on this, so feel free to comment below and tell us what you think!