Marks & Spencer admits online operation is unfit for digital age

Marks & Spencer profits have tumbled amid store closure plan. Credit: PA

“The genesis of any turnaround starts with the recognition of the unvarnished truth” - the words of the new chairman of Marks and Spencer, Archie Norman.

The unvarnished truth about M&S isn’t pretty. This morning the company has reported another fall in annual profits and revealed that sales of both food and clothing continue to slip.

But then you’ve heard that tale before, many times. The shocking “truth” is that M&S admits its online operation is unfit for the digital age.

Shopping is moving online at pace but M& is “too slow”, some of its systems are “outdated” and the new online distribution at Castle Donington is still “struggling to cope” with peak demand.

This is an extraordinary failure to face up to.

At one stage over Christmas, M&S had to remove 3,000 product lines from its website because Castle Donington couldn’t satisfy demand. Capping orders at the busiest time of year? Disaster. And self-inflicted.

In 2007 M&S signed a contract with Amazon (yes, Amazon) to run its website. In 2014, at great expense (£500 million) and to great fanfare, it relaunched M& on its own platform and opened a “state of the art” distribution centre at Castle Donington to process online orders. Four years on and neither works as planned.

The shift to online spending has been happening for more than twenty years and yet it’s managed to catch M&S out.

M&S was late to the online party and, when it did show up, proceeded to trip over the furniture. The company’s online sales have grown by 5% in the last year - sounds good but it isn’t. Next (15%), John Lewis and Debenhams (both 10%) leave M&S for dust.

This is not Armageddon, the dividend remain intact. But two years into the chief executive’s turnaround plan and M&S still looks in gentle, steady decline.

The share price is roughly half what it was when Steve Rowe took over.

Next has outperformed M&S' online sales growth. Credit: PA

This morning Rowe spoke of the “urgent” need to “accelerate change”.

Rowe has fired and rehired much of M&S’s executive team. He’s lowered the price of clothing, abandoned discounting and embraced“everyday style” instead of “fast-fashion”. He’s closed down much of the international business and he’s cutting costs in the UK by closing more than 100 stores as high street trade thins.

The strategy sounds sensible but we’re told sustainable profits and sales growth are still “3-5 years away”.

They won’t happen at all unless M&S can get its online problems fixed.