M&S buys its logistics provider Gist to accelerate supply chain transformation

Marks & Spencer is buying its own logistics provider, Gist, as part of its accelerating food transformation strategy.

The retailer is buying the entire share capital of Gist from Storeshield  for an initial £145m in cash, with a further £110m plus interest to be payable from disposal proceeds under certain conditions.

The move is part of M&S’s multi-year plan to modernise its food supply chain network in order to support its growth strategy – which includes the development of bigger stores, its partnership with Ocado Retail, and its supply deal with Costa Coffee.

M&S had launched Project Vangarde, a supply chain optimisation programme, in 2020 in order to increase efficiency across its expanding Food business.

But it now said there was “substantial opportunity to create a more efficient and effective supply chain” by investing in its network to reduce the cost to serve, update legacy systems and improve automation.

Gist, which counts M&S as its main customer, currently provides the majority of M&S Food logistics services via a network of eight primary and 10 secondary distribution centres located across the UK and Ireland, including several freehold warehouses.

M&S CEO Stuart Machin said the decision to buy the logistics company meant the retailer was “taking control of our food supply chain for the first time in our history”.

“This is the first step in a multi-year plan which will transform the entire supply chain,” he added.

“M&S has been tied to a higher cost legacy contract, limiting both our incentive to invest and our growth. The last two years have shown what can be achieved by working collaboratively alongside our partners at Gist.

“This has given me confidence that now is the time to take action and remove an impediment to our growth.”

Gist generated pro forma EBITDA of around £55m in the year to December 2021, with the majority of its profit reflecting management fees recharged to M&S under its contract, which will be eliminated once the businesses consolidate.

M&S said that the existing deal had a higher cost legacy contract expiring in 2027, which meant the acquisition would “generate immediate benefits” to the grocer as it wouldn’t have to pay further contractual fees and costs and it would save on operational synergies.

The company expects the transaction to be “earnings enhancing” in its first full year.

Gist CEO Michael Chambers will continue to lead the logistics business and report to M&S Food commercial director George Wright.