Chief executive Marc Bolland is confident M&Ss womens wear is now moving in the right direction

Chief executive Marc Bolland is confident M&S's women's wear is now moving in the right direction

UK retailer Marks & Spencer says it is "bang on" with the target market for its women's wear, and that it feels it now has the right focus to move the division forward to higher growth.

The comments came at the firm's earnings conference today (5 November) as women's wear was revealed as the bright spot in the retailer's clothing division in the first half of its financial year, as unseasonal weather weighed on the unit's overall performance.

Overall, clothing and footwear registered a drop in revenues of 1.6%, and like-for-like sales were down 2.2% - but the performance of women's wear improved, with sales up 1.3% in the first five months of the year.

"All of what we do with women's wear starts with product. The product is better, it's better quality, it's more stylish, and particularly also, it's more inspiring," CEO Marc Bolland explained.

"It's product people really enjoy. What has also improved is product presentation. We have improved both our stores and our online presentation. We have seen collections are well received by the fashion press...and the campaign we did was driven by inspiration. Interestingly, when we looked into research, 69% responded saying M&S sells fashionable and trendy clothes. So we are being seen as 'back on style' and 'back in trend'. What is also important is that we've seen our full price sales improve."

This view, however, is not one shared by Cantor Fitzgerald analyst Freddie George, who believes "the branding and the demographic and age profile of its customer being targeted remains unclear".

Nonetheless, Bolland seems confident M&S's women's wear is now moving in the right direction. "If you look at our 3m customers, the most important thing for them is...she wants something in style, in trend, some help and indication on what kind of trend to take, and what she wants when she comes to us, is she wants impeccable quality."

Bolland offered the example of a GBP69 (US$110) cashmere jumper the retailer has in its line that can be machine washed.

"This sets us very strongly aside from other retailers," he told just-style. "The quality from us is simply different quality. If we keep that focus...and innovate around it, on style and in the right environment. We bought the style back and we bought the quality back. So it's making sure the quality is there. I think we're bang on and that's why the researchers came back to us and said you've got it more right now and that's what we're focused on, bringing new lines out."

Marks & Spencer didn't break out figures for men's wear or kids' wear and Bolland declined to offer any indication as to which lines performed the best.

Sourcing benefits starting to show
The retailer has been working to update its sourcing and logistics systems, and the changes here are now starting to come through.

UK gross margin was up 50 basis points at 41.8%, driven by strong improvement in general merchandise. Of this, around 120 basis points is from the sourcing side, Bolland said, and 30 from lower discounting.

"We shifted within our present supply chain to factories in other countries or factories within the existing supply chain," he explained. "What we are doing in our general merchandise business is, either we're shifting volumes from one end to the other with the supplier, and the supplier finds a location where he can produce it in a better way, or the suppliers consolidate."

Bolland emphasised that this will not affect product quality. "We are enhancing quality by doing this because we are reinvesting some of the gains we have made back into the product. This is something that goes hand in hand. By setting up our supply base differently, getting more opportunity for direct sourcing gives us more opportunity to buy better."

He added that the changes M&S is making to its supply chain are not about dropping suppliers.

"We're changing the supply base and in some instances where there is consolidation yes, we will change supplier because we are consolidating where there are opportunities in certain locations and different mills, and in some cases a supplier might have more than one mill. The detail is that we are able to consolidate and therefore get much more efficiency out of that."

Warmer weather
Bolland also addressed the issue of warmer weather in September and October, which has had a clear impact on the performance of most UK retailers in their latest quarters. Not surprisingly, he said the impact has been felt most in women's wear.

"We saw an improvement in trend; however, [weather] had an impact from September. The system we are using more in the future is much more 'open to buy'. This is what we've already started to do and can do more from direct sourcing. So when you have direct contact with a supplier you can keep contracts more 'open to buy', it's easier and we are going to do more of that over the next period of time. That is one thing we were already using in the first half."

Marks & Spencer is currently in the process of recruiting a new CFO, with the role currently held by interim finance chief Paul Friston.

Asked about a replacement, Bolland said the company was making good progress. "We've seen a few people already in the advanced stage. We've been very clear that Paul is doing a great job in the interim, he is not the candidate and we are externally sourcing. I'm not in a hurry because he is holding the position very strongly and we have a great team."

Indeed, the company's finances are holding up well, with its share price up nearly 10% in early morning trading. Group sales in the first half were up 1% to GBP4.9bn, while underlying profit before tax climbed 2.3% to GBP268m.

Concluding, Bolland said: "We made strong progress against our priorities, it was about gross margin for general merchandise, it was about women's wear and it was about food growth.

"We have a clear strategy and it helps so much working in a business that is clear on strategy but also clear on values. When the clarity is there, execution has to follow and we have to be very consistent. Improving profitability and cash generation is what this year is about. So our focus, as we said clearly at the start of the year, is all about delivering."