M&S takes stock of a basic retail blunder

LONDON BRIEFING:THE MOST basic rule of retailing is to get the right product on the shelves at the right time, in the right place and at the right price. It's hardly rocket science and the result should be satisfied customers and healthy profits.

So it came as a surprise yesterday to hear that one of Britain’s most experienced retailers had messed up buying in its core womenswear offer over the opening months of the year.

Marks & Spencer may have had the right product at the right time but it didn’t have nearly enough, and the result was dissatisfied customers and missed sales targets.

In knitwear, M&S sold 100,000 items but, admitted chief executive Marc Bolland, could have shifted three times that amount if only it hadn’t run out of stock. In women’s pumps, it could have sold double what it actually did.

The unseasonably cold February weather may have played a part in fuelling extra demand for knitwear, but the fact is that M&S made a basic blunder in failing to anticipate which lines would fly off the shelves.

The M&S boss was coy when talking to reporters yesterday on exactly which products its customers went short of, whether they be cardigans, twin-sets or jumpers, not wanting to tip off high-street rivals. However even if it replenishes stocks in the next few weeks, most of those lost sales will be gone forever.

Shares in M&S reflected the market’s disappointment, falling by 4 per cent at one stage as Bolland reported a 2.8 per cent drop in underlying general merchandise sales over the 13 weeks to March 31st, against expectations of a modest rise of 0.2 per cent.

Performance of the much smaller food division was also deemed lacklustre, with sales rising by 1 per cent instead of the expected 1.6 per cent.

Other parts of the business turned in reasonable performances, including menswear, lingerie and childrenswear. Its revamped website helped push internet sales up by more than a fifth.

The group says it will meet full- year profit expectations despite the missed sales targets, but this is largely because of its continuing attack on costs and curtailed capital expenditure. For example, instead of spending £600 million (€728 million) rolling out its new stores format, it is now budgeting for £500 million.

The good news for M&S is that the consensus profit forecast for the full year remains unchanged at £694 million, although that is still well short of the figure it turned in 14 years ago when it first breached the magical £1 billion profit barrier.

If it wants to get back into the £1 billion club, Bolland’s buying team needs to avoid any more embarrassing blunders – there is only so much that can be cut from costs to make up for basic retailing mistakes.

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ONE WAS founded in 1851 and has dressed film stars and politicians from Humphrey Bogart to Winston Churchill and Margaret Thatcher. The other was founded in 1856 and is famous for kitting out Norwegian explorer Roald Amundsen, as well as the queen and Prince of Wales.

Aquascutum and Burberry, both famed for their signature raincoats, are two of the oldest and most prestigious names in British fashion.

In the 160 years though since Aquascutum was founded (Burberry is just five years younger), the two have taken very different paths.

As Burberry, a FTSE 100 company, was yesterday reporting another double-digit sales rise, poor Aquascutum collapsed into administration, forced to abandon its long battle against mounting losses.

While Burberry has been opening flagship stores around the world, from Bond Street in London to Paris, New York and Rome, Aquascutum has just three stores on the UK high street, none of which could be described as a flagship. Retail entrepreneur Harold Tillman bought the already heavily loss-making Aquascutum three years ago, putting it together with another classic brand, Jaeger. He had high hopes of “doing a Burberry”, but losses continued to mount.

On Monday, in an attempt to protect it from the Aquascutum collapse, Tillman sold Jaeger to venture capitalist Jon Moulton for just £20 million.

Moulton is expected to axe a number of Jaeger’s 50 British stores and 90 concessions.

Burberry, meanwhile, is now one of the world’s leading luxury goods brands and is valued at more than £6 billion on the stock market. Its shares took a knock yesterday, falling by some 6 per cent, despite news of another impressive quarterly sales performance and plans for further expansion.

However that was because some investors decided to take profits – a concept with which Aquascutum and Jaeger are sadly unfamiliar.

Fiona Walsh writes for the Guardian newspaper in London