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Marks & Spencer smells blood in battle with John Lewis

Marks & Spencer
Marks & Spencer

Katie Bickerstaffe was in high spirits as she addressed Marks & Spencer’s investors.

“I have to be told to simmer down,” the co-chief executive said last October.

What Bickerstaffe was so animated about was M&S’s new clothing strategy: stocking rival brands for the first time in the company’s 139-year history.

Selling other company’s clothing alongside M&S’s own products was an “enormous opportunity”, she said, one that Bickerstaffe claimed could be worth £400m to the retail stalwart in the coming years. Privately, senior leaders have discussed sales as high as £1bn.

The strategy, which was first tested in 2020 but ramped up last year, offers M&S the chance to fix its troubled clothing division, which has long been a thorn in its side.

What’s more, it could see the company leapfrog its arch rival: John Lewis.

L-R: Stuart Machin, Katie Bickerstaffe, Eoin Tonge - Oliver Dixon
L-R: Stuart Machin, Katie Bickerstaffe, Eoin Tonge - Oliver Dixon

As the employee-owned department store struggles with losses, unrest among partners and unease over its strategy, Marks & Spencer has spotted an opportunity to steal its crown as the outfitter of the middle classes.

M&S has been actively approaching brands stocked by John Lewis in an effort to get them to list their products.

“They saw that we were on John Lewis and were doing quite well,” says the chief executive of one brand.

M&S now lists almost 200 outside brands on its website across homeware, fashion, footwear and beauty. More than 120 are also stocked by John Lewis.

In many cases, M&S has found a receptive audience. Recent negative coverage around John Lewis “is never helpful and our customers do read a lot of what’s out there”, the executive said.

“We have to make sure there is value on both sides and if there isn’t, then we’ll be making more investment on the other websites we’re listed on.”

Some clothing companies are said to have been unhappy with the chunk of sales taken by John Lewis. The department store was reported to be charging commissions and fees of as much as 50pc in 2021 and was said to be looking to push this higher.

Fashion brand Seasalt pulled its lines from John Lewis around the same time, citing “strategic reasons”. The Cornish brand is now stocked on M&S and last week announced an extension of the deal.

marks and spencer clothing st helens - Marks & Spencer
marks and spencer clothing st helens - Marks & Spencer

Brands listed on both M&S and John Lewis said the former offered better rates of commission to retailers.

A John Lewis spokesman said their commission rates were “fair” and said the company “continue[s] to attract prestigious brands and brought onboard a further 65 new brands across fashion, beauty and kids this year”.

An executive at one brand says of M&S: “We see them as easy to work with and central to our strategy over the next five years.”

The momentum has many observers wondering whether the company may have finally turned around its long-suffering clothing business.

While M&S has a strong base of loyal female customers who shop for underwear and other essentials, it has struggled for years to shake an image of dowdiness developed in recent decades.

As a result, the underperforming clothing and home division has been a consistent drag on overall performance.

Stocking rival brands that can appeal to different age groups and demographics could be the key to turning things around.

In the past 12 months, it has gone from stocking 40 clothing and footwear brands to 60, including Clarks, Jaeger, Ted Baker and White Stuff. Executives hope to grow that number to 100 in the coming years.

M&S poached Amazon executive Nishi Mahajan from her role running the online giant’s fashion business in February to lead the charge.

The fruit of Bickerstaffe and her colleagues’ labour will be revealed this week when M&S reports its full year results on Wednesday.

The City expects clothing and home sales to be up 10.5pc in the year to the beginning of April, following a bumper performance over Christmas.

Over £1 in every £10 spent on clothing in the run up to Christmas went to Marks & Spencer, according to Kantar data, marking the retailer’s best performance in eight years.

“If they are announcing two consecutive periods of sales growth, then even a cynic like me would start saying, maybe there is change here,” says Richard Hyman, an analyst at Thought Provoking Consulting.

Clive Black, an analyst at Shore Capital, said M&S appears to be “butter side up” at the moment, with data suggesting that the retailer is “gaining healthy share in clothing and home, and food at the same time and sequentially, a rare occurrence over the past two decades”.

For years, M&S had pinned its future on food. Grocery remains pivotal to the group but the focus on clothing has been fortuitous: supermarket margins and sales are under intense pressure from soaring inflation and the cost of living crisis.

Sales growth at its food division is expected to be a little weaker at 7.7pc as a result.

M&S’s strong performance is in no small part down to the weakness of rival John Lewis. The department store, which also owns Waitrose, recently scrapped staff bonuses and warned of job cuts after slumping to a £234m loss last year.

With its rival in disarray, M&S is forecast to surpass John Lewis Partnership as Britain’s seventh largest retailer possibly as soon as this year.

“It is clear that M&S is taking share from the increasingly troubled John Lewis partnership,” analysts at Credit Suisse say.

M&S is now seen as Britain’s strongest brand, according to YouGov’s annual ranking, rising from third in 2019. John Lewis, meanwhile, has slumped from first to sixth.

Still, it is early days. Hyman said there were some concerns about whether stocking outside brands would cannibalise M&S's sales, rather than growing the pie.

Some inside the company are already grumbling that outside brands are outselling some homegrown M&S lines.

Executives have been pushing staff to use it as an opportunity to be more creative. Bickerstaffe said in October that the shift has been “counter-cultural and credit to the team, we’ve cracked on through this”.

Results this week will give a clear indication of whether the strategy is leading to higher sales or simply driving shoppers towards lower-margin third party products.

After years in the doldrums, M&S may finally be back in fashion.