“The customer trolley dash for treats at Marks and Spencer Group Plc (LON:MKS), which has prompted the retailer to raise its forecast for full year profit, shows just how lucrative the food arm of the business has become. Marks and Spencer may have been late to the grocery e-commerce party, but arriving with Ocado in arm, it’s muscled into a prime spot on the dance floor, and is enjoying the hits. It looks like this long suffering high street stalwart has turned a sharp corner, proof that management’s transformation strategy is paying off, and investors have cheered on the news with shares rising 18% in early trading.
Marks And Spencer Is Metamorphosing Into A Grocery Powerhouse
Rather than a department store which sells food as an extra, Marks is metamorphosing into a grocery powerhouse which sells clothes and homewear as add-ons. Food sales increased by more than 10% on 2019 levels, while clothing and home revenue fell by 1%. It seems customers are increasingly inclined to do their big shops at the store, spurred on by more ‘value’ offers on the shelves.
It’s a well-timed shift particularly given the supply chain issues affecting homewear and clothing right now. The company has already warned that ongoing problems in sourcing means there could be shortages in ranges until next Spring. Given the supply issues and also the lower demand for smarter outfits M&S is known for, as so much of the workforce continues to work from home, it’s likely recovery in this part of the business will be slow."
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
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