M&S in ‘good shape’ to weather rising inflation, outgoing CEO Steve Rowe assures

Marks & Spencer is well positioned to weather mounting price hikes and the growing strain on supply chains, outgoing CEO Steve Rowe has assured.

Rowe, who delivered his last financial year results speech after six years at the helm of M&S, said the company was aware of the coming hurdles but it had been focused on strengthening its supply chain to avoid passing on cost increases to shoppers as much as possible.

He added that M&S was focused on “making sure we pass as little of it on in the categories that really count for our customers” including key value items such as fruit & veg and ready meals.

“We work very hard with our supplier base, we’re mitigating these costs wherever we can to make sure we continue to offer outstanding trusted value in both clothing & home and food,” he said.

“Price inflation is a real thing and we have to accept it and make sure that we run the business in the right way, not just for consumers but also shareholders.”

Despite the challenges, M&S met the City’s expectations following profit upgrades earlier this year.

The company posted a full-year pre-tax profit of £391.7m – up from a £201.2m loss the year before – with the food arm of the business recording growth of 10.1% compared to 2019/2020 pre-pandemic levels.

This rose to 15% when stripping out the hit to hospitality and franchise sales.

”M&S’s food offering continues to deliver for the group and our experts say it could be their secret weapon against the inflationary pressure set to rattle other supermarkets,” said Third Bridge analyst Ross Hindle.

“M&S’s premium brand positioning means they are less vulnerable to the pressure from discounters and many of the shoppers they do lose will be replaced by new customers trading down from eating out.”

However, M&S said the real effects of inflation and the squeeze on global supply chains were expected to make a dent later this year and into the next year, and admitted profits would be lower in the 2022/2023 financial year.

But Rowe insisted the high street behemoth was at a “good inflexion point” in its transformation journey, and was set to move on to the next phase with “a great team” of leaders – including co-CEOs Stuart Machin and Katie Bickerstaffe, and group CFO Eoin Tonge.

Joining Rowe at the results presentation, Tonge said M&S’s own food inflation was “broadly in line” with the current rate of inflation in the broader food marketplace of around 6%.

According to recent Kantar data, almost a quarter of British households are struggling to afford their weekly shop as grocery prices are increasing at the fastest rate in 13 years.

However, the M&S chief did not say whether there was more room for further price cuts on key value items as the cost of living crisis escalates.

Earlier this year, the grocer slashed prices on a number of everyday essential items across its Remarksable range in a bid to attract more weekly shoppers.

Rowe said the priority now was to “maintain our competitive position”, adding “the key thing for us is to make sure that we take the opportunities to continue to improve the inefficiencies in our business and the team are well placed to do that and mitigate as much as possible”.

The M&S boss, who has had a nearly four-decade career at the retailer, has now officially passed on the baton to Machin, who will continue to oversee the food business, and Bickerstaffe, who will be responsible for clothing & home.