UK retailer Marks and Spencer has indicated that it hopes a focus on its Simply Fuller Longer and Dine In lines will drive continued sales growth at its food business.
The UK retailer today (17 April) booked an increase in fourth-quarter UK food sales, which rose by 3.1% and helped to offset a fall in general merchandise driving total UK sales gains of 1.2%. On a like-for-like basis food sales were up 1%, the company added.
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Commenting on the result during a conference call this morning, CEO Marc Bolland said the group’s “main success” was in healthy food, where he suggested M&S has become a market leader.
“When you look at our Simply Fuller Longer range, we brought out 23 new lines, that is an increase of 50%,” Bolland emphasised.
Over the course of the year, Marks and Spencer added around 2,000 new lines, more than 25% of the number of food SKUs carried. The company is currently rolling out a range of modern Spanish cuisine, including 13 new products such as paella and marinaded chicken.
M&S has also focused innovation efforts on its Dine In concept, and has looked to drive innovation by “bringing more products in to Dine In”, Bolland revealed.
“We think we still own the territory of Dine In for two. Others try to copy us but they don’t come close,” he added.
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By GlobalDataBolland revealed that the company saw a surge in Dine In sales this Valentines day, when the company offered a three course meal for two, a bottle of wine and a box of chocolates for GBP20. M&S intends to drive further growth of the concept by adding new products and offers, he added.
“The way we would like to do it is bringing new product into dine in and that is a way of introducing new innovation,” he said.
While Marks and Spencer has been less promotional than some of its competitors in the food retail market, Bolland insisted that Dine In provided an ideal promotional tool to drive revenue growth.
Bolland also said that the company had been able to keep food price inflation down when compared to a market average of around 5%.
“Our promo participation has been just a bit lower than the market. Our price inflation has been quite a bit lower than the market. Price inflation for the quarter being roughly 5% plus for the market and for us it was roughly circa 2.5%,” Bolland said. “We kept costs and margins under control. Most of our products are value added, so higher commodity costs had less of an impact.”
The company also revealed that it has shaved an expected GBP100m off the cost of its store refurbishment programme, which aims to update 731 stores by mid-2013.
M&S tested the concept on 15 pilot stores, which Bolland said have been “well received”, and the group has refitted around 70 outlets to date.
Having “thoroughly tested” the new concept and by focusing on “strong management of capital investment”, the company said it expects to complete the refurbishment programme for GBP500m, instead of the GBP600m previously targetted.
Savings have been identified in a number of areas, management revealed today. These have ranged from “no downtime” as one store refit is completed and another begun, to avoiding any changes to work that has been signed off on.
Singer Capital Markets analysts welcomed the projected cost-savings in the refurbishment programme, suggesting that these overshadowed the group’s overall disappointing sales performance.
“Cost savings more than offset the sales miss and guidance for FY13 is better than we had factored in. With pilot stores performing well and now costing less to refit, we are comfortable with our buy recommendation,” the analysts wrote in a note to investors.
