Few retailers have the ability to break the internet quite like Marks and Spencer.
Over the past week or so savvy shoppers have taken to social media to praise its Summer Beauty Bag. The stylish travel kit which includes 12 coveted skincare and beauty products sold out last year and its return has been highly anticipated.
This is not a fluke on Marks end, the beauty industry is worth a whopping £9bn in the UK, and the figure is likely to rise as the shoppers continue to treat themselves to ‘small luxuries’ amid the cost of living crisis.
The Summer Beauty Bag is worth £170 in total, but customers can buy it for £30 when they spend £35 or more on clothing, home or beauty in-store or online.
Just last month, the retail giant sent shoppers rushing out to buy a £10 perfume which mimicked the scent of Sol De Janeiro’s pricey ‘Brazilian Crush’ scent. The product is now completely sold out.
Away from beauty, the high street darling’s complete overhaul of its once frumpy clothing and homeware division has helped the money to roll in over the past year.
Not to mention the churn of its food products, which go viral on a regular basis. Its cheeseburger pasta salad went on to be debated on Loose Women after it was discovered that it had more calories than a ‘Big Mac’.
M&S’s seemingly effortless ability to remain at the forefront of consumers’ minds has helped it outperform its competitors.
Employee-owned John Lewis is still trundling along with its turnaround plan, with its balance sheet being helped by price cuts at its grocery venture Waitrose.
Debenhams‘ move to an online pure-play following its acquisition by Boohoo some three years ago also eliminated rivalry amongst an older demographic still keen to shop on the high street.
So, it is no surprise that shares in Marks and Spencer are trading very close to five-year highs. They rank as the second-best performers within the FTSE 100 over the past 12 months.
The business will deliver its full-year results on Wednesday morning. It expects to post a 35 per cent rise in underlying pre-tax profits to £653m for the year to April, with revenue growth of 8.9 per cent.
Russ Moud, investment director at AJ Bell, said: “M&S is only expected to make £290m in the second half, compared to £360m in the first, despite the fact that the second six months of the year are usually much stronger than the first six, owing to Christmas. In the past decade, M&S has, on average, made £100m more in the second half compared to the first.
“Ongoing investment, variable weather, sticky interest rates and the uncertain economic outlook could have made for a quieter-than-usual second half, but M&S does seem to be on the right track, and a number of factors seem to be at work.”
He added: “First, UK wage growth remains strong and that is helping retailers, especially those whose demographic is the one that shops at Marks & Spencer. Second, the food offer retains its reputation for quality and providing a treat.
“Third, the acquisition in 2022 of Gist, M&S Foods’ principal logistics provider, is providing scope for synergies and cost benefits and helping margins at the food business.”
Charlie Huggins, manager of Quality Shares Portfolio at Wealth Club, said: “Probably the most impressive thing about the M&S turnaround story so far has been the market share gains, in both clothing and food.”
“They have been able to achieve this while reducing discounts, which is a good sign. In other words, they aren’t just slashing prices in the hope of getting quick sales growth. Rather, they are focused on reinvigorating branding and designs, which is a much more sustainable route to sales growth.”
He added: “This sales growth is not coming at the expense of profits either. M&S has taken a knife to costs. This has made the business more efficient and means more of the sales are flowing through to the bottom line.”
“All-in-all, M&S’ self-help initiatives and execution have been impressive. But investor expectations have now re-set accordingly. This means it will need to sustain its recent trading momentum to keep investors happy.”
But tensions are brewing between Ocado and Marks and Spencer, with the pair currently embroiled in a dispute over a final payment related to their online food joint venture.
Ocado and retail giant Marks signed a 50:50 deal nearly five years ago for Ocado to sell the retailer’s food via its online store, with Marks paying an upfront sum of over £560m.
It is due to pay an additional £190.7m this August, based on certain performance targets being met.
Marks has claimed Ocado has not reached these performance targets, so it is withholding the final payment.