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• Shops to adapt ranges to local demographics
• Revamp comes after £3bn spent by previous boss
Marks & Spencer is to match the food and clothing ranges in its British shops to the wealth, age and ethnicity of the local area, as part of a £600m overhaul to make its stores "more inspiring" places to shop.
M&S boss Marc Bolland insisted the changes to the product ranges would not short-change customers in poorer parts of the country. It is not about a "bottom or top tier of stores" but finding the "right tone of voice" said Bolland of the plan which he hopes will boost sales at its 703 UK outlets: "We are not doing rocket science; this is about best practice in retail."
Stores have been grouped into "clusters" assessed by five local criteria – affluence, demographic, competition, region and ethnicity. Trials of the new layouts are due to begin in the autumn. Bolland gave one example, of putting its premium childrenswear ranges into stores in wealthy areas where the store catchment included lots of families.
Bolland, who joined on a £15m pay and bonuses deal, has set a target to increase group sales by up to £2.5bn over the next three years. To get there the former chief executive of Morrisons supermarkets has cranked up capital expenditure from its normal rate of £600m a year to £900m for the duration, with two-thirds of the increase earmarked for British shops.
The substantial investment comes on top of more than £3bn spent by Bolland's predecessor, Sir Stuart Rose. Bolland said that had fixed only the basics, with customers still telling the retailer its stores were "difficult to shop" in.
The retailer still has 90 stores to modernise and Bolland said he needed to "finish the job".
"While the last store modernisation programme improved the core infrastructure of our stores, it has not delivered an inspirational shopping environment for our customers," he said.
When Bolland arrived last year he promised "evolution, not revolution" and he has stuck to his word with new-look labels for its Per Una range among the changes trumpeted. He said he was "not throwing money away". His strategy for increasing profitability at M&S hinged on improving sales densities at existing stores, growing the internet business and going for measured expansion in emerging markets such as India and China.
The pilot stores will also test improved signs and layouts that make brands such as Per Una and North Coast stand out. It said customers were confused about the difference between its 11 clothing sub-brands. Bolland also wants to capitalise on the strength of the retailer's name, which he said was its biggest asset, and come the autumn its main clothing ranges will be labelled M&S Woman and M&S Man.
His first year in charge saw M&S report a 13% rise in profits to £714m for the year to 2 April. The retailer said it had made a good start to the new financial year, flagging up the success of recent advertising campaigns such as for the "tummy tuck" swimsuit featuring model Lisa Snowdon.
Under Rose, profits hit £1bn only to fall back sharply in the recession and Bolland said it was not about "holy numbers" but about building a sustainable business. M&S has been outperforming rivals in a tough sales environment, which analysts put down to its strength among older and more affluent customers, who are coping better as incomes are squeezed. M&S said industry data showed it had increased its share of the clothing market over the period by 0.5% to 11.7% and its share of the food market by 0.1% to 3.9%.
Tony Shiret, a Credit Suisse analyst who was one of Rose's severest critics, said he was optimistic about Bolland's strategy but the jury was out : "We think that investors will not buy into the long-term story until there is a realistic prospect that M&S can break through historical levels of profit … It is still too early to make that call," he said. The shares closed down nearly 3% at 385.6p.