Evolution, not revolution.
It’s a favourite phrase of Marks and Spencer chief executive Marc Bolland and tomorrow (9 November) the City and the food industry will hear just what the Dutchman has in store for the UK retailer.
Since Bolland first sat in the M&S hot seat in May, he has kept his cards pretty close to his chest, pointing to 9 November and the publication of M&S’s half-year results as when he would reveal his strategy for the business.
Speculation over Bolland’s blueprint for M&S has been rife in recent days. Expansion in Europe, selling food online, scaling back the number of food brands sold in stores – these are just three of the possible plans put forward by City analysts ahead of one of the year’s most awaited business briefings in the Square Mile.
To those outside the UK, it is difficult to explain the position M&S has in the national psyche. The retailer, founded in 1884, is up there alongside the NHS as a UK institution that attracts praise and criticism in equal measure. Bolland breathed fresh life into Morrisons during his three years at the UK’s number four food retailer and the very early signs at M&S are encouraging.
In October, M&S posted strong second-quarter sales across food and clothing and Bolland claimed consumers were “returning to quality”.
Nevertheless, across both businesses, M&S faces formidable competition; in food, from the likes of Tesco, Asda – who have also both appointed new CEOs in recent months – and Waitrose, which despite its upmarket image, has thrived during the downturn; and in fashion from Primark (whose owner Associated British Foods publishes its annual results tomorrow).
M&S, however, has a profile that dwarfs Morrisons and tomorrow Bolland, even though he has officially been in the M&S hot seat for six months, will kick off his era in earnest.
So, are shoppers, as Bolland has noted, returning to quality? US natural and organics retailer Whole Foods Market seems to think so and, last week, published bumper annual results and, notably, announced plans to open more stores in the UK.
Whole Foods suffered in 2008 and the first half of 2009 as the recession hit the business and the retailer, which launched its flagship UK store in London in the pre-crash days of 2007, put its expansion plans on this side of the Atlantic on hold.
However, co-CEO John Mackey said on Wednesday (3 November) that, despite the still-fragile state of the US economy, he could see signs of consumer confidence improving and shoppers trading up in certain categories. In the UK, where Whole Foods plans to open two more outlets, the retailer was seeing “steady improvement” in sales, Mackey said. Above all Whole Foods, Mackey said, was “incredibly bullish” about its business.
Nevertheless, concerns over the economy persist on both sides of the pond, with unemployment remaining stubbornly high in the US and the prospect of dole queues lengthening in the UK on the back of the coalition’s review of public spending. Bolland and Mackey may be seeing improving consumer trends but economies are staggering out of the deepest recession for decades and trading will remain tough. The fact that one of Whole Foods’ new UK stores will not open until 2013 indicates the cautious nature of the retailer’s expansion here.
And, elsewhere, there remains a degree of pessimism about trading conditions in the year ahead. “We’re not anticipating any massive change as we look at 2011 at this point,” Kellogg boss David Mackay said last week as he commented on the economic outlook for the US and Europe. Cereal giant Kellogg was keen to look ahead with optimism after a challenging 2010 but the company’s conservative forecasts belied just how challenging the business expects 2011 to be.