6th Oct 11
M&S suppliers asked to finance store revamps
by Katie Naylor
Price of a facelift: M&S move seen as desperation by experts
Price of a facelift: M&S move seen as desperation by experts
Mark & Spencer has asked for the help of its suppliers to finance its store refurbishment project, a move which indicates how difficult the retailer is finding times on the high street, claim analysts.
M&S’s 60 biggest non-food suppliers attended a meeting at the High Street Kensington shop in west London. During the meeting, chief executive Marc Bolland told them that, starting this month, they would have to pay an amount equal to 1.25 per cent of the total turnover of sales to the retailer in the year ending August 2011.
The funds, which are said to be in the low tens of millions of pounds, will finance its £600m refurbishment programme as well as further advertising, including a campaign featuring model Rosie Huntington-Whitely. The redesigned stores will display different sub-brands, like Autograph and Per Una, more clearly.
M&S has previously asked suppliers for help in funding marketing. In 2006, it sent all its suppliers a letter informing them that it would unilaterally cut 10 per cent from their invoices, while in 2008 it reduced food suppliers’ invoices by 6.5 per cent during Project Genesis, which was dubbed Project Genocide by suppliers.
Experts say the move was evidence that the retailer was finding life increasingly difficult on the high street, while some questioned why the company needed to raise funds from suppliers when the previous chief executive Sir Stuart Rose spent over £2bn revitalising shops just a few years ago.
Panmure Gordon’s Philip Dorgan said that the autumn/winter period is the shortest season, averaging the highest selling price. However, he said that September didn’t begin well and the recent spate of warm weather has had a negative impact on the high street.
He went on to say that everyone is fighting for trade, describing these times as “twitchy”. He explained that it is important to get as much money as possible into the business, adding that it is a classic tactic to ask suppliers to share the burden. The BDO High Street Sales Tracker for the week ending 2 October revealed that total fashion sales fell by 13.3 per cent, the poorest result since severe weather affected sales in February 2009.
Seymour Price analyst Freddie George said that the fact the retailer requested a 1.25 per cent contribution from its suppliers indicates that trading has been difficult during the company’s second quarter and that M&S has a finance director who is very cost conscience.
Company sources said its clothing suppliers had generally benefitted from decreasing commodity prices over recent months, with the cost of wholesale cotton falling 50 per cent from its recent high, and polyester dropping nine per cent. A spokesman said that suppliers would gain a mutual benefit from both the refurbishment programme and the international expansion, which it is hoped will boost sales by a minimum of £1.5bn by 2013/14.
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