Comment

Unlike its clothes, Marks & Spencer’s rebrand already looks worn

M&S’s first loss in 94 years leaves the promise of a turnaround looking like an all-too familiar tale of ‘jam tomorrow’

M&S
This article is from The Telegraph’s City Intelligence newsletter. Sign up here for incisive analysis of the day's biggest corporate story from our chief City commentator Ben Marlow.

T hat’s the thing about fancy new corporate mottos. At best they’re pretty meaningless, at worst they have a habit of coming back to bite you on the backside.

And so it is that “never the same again” is already turning out to be an unfortunate bit of rebranding for Marks & Spencer, because surely the whole idea behind it was that it was supposed to signal the moment when the nation’s favourite retailer turned a corner.

Well, it has certainly done that, though not in the traditional sense. The chain’s first ever loss in 94 years as a public company must be the corporate equivalent of rounding a bend and smashing straight into a brick wall. 

With £88m of pre-tax losses to show for the six months to the end of September, compared to a £159m profit the previous year, the greatest marketing department in the world would struggle to put a positive spin on that. Even during the Second World War M&S managed to stay in the black.

Still, the folk at M&S are certainly doing their best to remain upbeat. Boss Steve Rowe described the results as “more robust than at first seemed possible”.

Well, there is that. It doesn’t get much tougher than trying to run a high street retailer in the middle of a pandemic, not when large swathes of your estate has been forced to close its doors. Still, Next proves it is possible.

Naturally M&S would prefer to focus on the operating level, which showed a £62m profit, but it’s hard to ignore another £70m in assorted costs and charges, when total “adjusted items” in the last five years now stand at more than £2bn. 

As ever Rowe will take comfort from its food halls, where sales held up and operating profits came in at £110m. A tie-up with Ocado has been touted as a game-changer but it’s too soon to tell whether it will live up to such a billing. Online sales have leapt too.

But booming demand for women’s pyjamas and men’s knitwear failed to prevent a familiar slump in clothing, which swung from a £109m profit to a £107m loss. 

Rowe is keen to emphasise how the crisis has accelerated transformation - “three years’ change in one”, as he puts it - but the greatest shift is in the gap between food and clothing, which has turned in a giant chasm

A bold move would be to consider a complete separation of the two but there is no chance of it happening, at least not in the coming years, and not just because it would be very messy. At M&S headquarters, they take the view that diversification is a blessing right now.

Instead, Rowe will plough on with a restructuring that has so far yielded little but management insists will one day turn M&S into a lean, digital-first, 21st century retailer.

Yet, having listened to a version of the same story for the best part of two decades, shareholders must be wondering whether this time will be any different, or if the retailer is simply going round in circles.

With the share price down more than 50pc this year, including 20pc since August alone, investors look to be losing faith.

Tough balancing act for John Lewis

The pandemic has lit a fire under corporate restructuring plans and no more so than at John Lewis, where Sharon White has shown there is little room for sentiment if another of Britain’s venerable high street names is to be saved.

Another 1,500 job cuts at a head office that employs 5,000 would be a sizeable number for any organisation. But for a partnership that prides itself on doing things differently, it is absolutely brutal. 

The reality, of course, is that no chief executive hoping to shake up a sleepy organisation like John Lewis can hope to make friends along the way. But nor can White afford to alienate the workforce if she wants to “bring people with her” as they say in management school. Striking a balance will be half the battle. 

Still, there’s usually little love lost between those cocooned in corporate headquarters and staff getting their hands dirty on the frontline, so the shock to morale may be short-lived, especially if it frees store staff to make more decisions, as White hopes.

At some point though, the heavy-lifting has to stop. The whole point of this aggressive cost-cutting is that it frees up hundreds of millions to invest in John Lewis’s online proposition, click and collect service, and delivery operations. The really hard work starts with executing the plan.

Lloyds swings the axe again

Job cuts too at Lloyds, which is axing another 1,000 roles despite racking up £1bn of profits in the last three months alone, plus the expectation of hundreds more as part of a rescue deal at Clarks shoes.

Coincidence? Or, with the world gripped by the race for the White House, simply a good day to bury bad news?