We learned that the reporting of retailer catastrophe in the UK is at best “lazy”, but at worst, scandalous; that one of the most trusted and most iconic brands on the high street is only just emerging from “crisis” mode and is now embarking on the first phase of a four year transformation programme; and that the landlord and tenant “love-in” needs a lot more work. 

Whilst the BBC report tumbling retail sales, the reality is somewhat different. Retail sales values were up 4.2% year-on-year in September and volumes (i.e. excluding inflation) were up 3.2%.

Perhaps not surprisingly, DIY sales growth was up 12% for Q2 and Q3 2018, with furniture and flooring up nearly 8% for the same period. Clothing remains a struggle, but still showed positive sales growth.

The media obsession with misrepresenting retail sales data to paint a picture of weak consumer demand is deflecting attention away from the root causes of current retail distress, most of which are structural and a legacy from better times in the past.

Knight Frank’s Head of Retail Research Stephen Springham also presented his expectations for Christmas trading, which is likely to be more solid than many in the media would have us believe.

Retrenchment and store closures are fundamental to M&S's transformation programme

That is notwithstanding Black Friday, “a margin-sapping, throat-slitting exercise in me-too desperation amongst retailers” - one of Stephen’s more printable musings on the retail extravaganza in November. 

Thanks to a wonderfully honest and insightful presentation by Steve Bennett, Property Director at M&S, we also discovered that M&S have recognised their own failings and have spent the last two years in self-dubbed “crisis-mode”, effectively “putting out the fires”.

This isn’t a quick fix, but a focus on profit rather than revenue; it is a programme of modernisation, consolidation and most importantly, a focus on their products and their customers. The fix is due to be completed by 2022 over three phases (1. Restoring the Basics 2. Shaping the Future 3. Making M&S Special). 

Some key figures from Steve included a 100%+ growth in food sales over the last 20 years, while clothing and homeware has shrunk by 10% in the same period.

But there is still considerable synergy between the food and non-food businesses, with 40% of their massive 32 million customer base shopping for both. The M&S website (“Our Biggest Store”) has 8.3 million visits a week, but is seen as integral to the store network, rather than a replacement.

Of real relevance to the property world, customers who shop “omni-channel” i.e. via the internet and physical stores, are worth six times more than the single-channel customer. 

Finally, Steve also shed light on the company’s property strategy and the challenges of addressing what is a largely legacy-based portfolio. Retrenchment and store closures make for negative media headlines, but are actually fundamental to the transformation programme.

Of significant importance to the landlord is that the recapture of customers once a store has closed can often be very positive – in one example, by closing an old, legacy store in a down at the heel high street, trade increased by over 300% in a store less than 10 minutes away.

Why? Loyal customers to the older store were attracted to the more modern, full-service store and were inclined to spend more. Conclusion, M&S can afford to close the ca. 100 stores as recently announced, especially where they have good quality alternatives in the catchment. 

In a lively Q&A, Steve was asked about the importance of an active landlord and tenant relationship. Now two yeares

into the job of Property Director at M&S, Steve is staggered that he is yet to hear from at least ten landlords who are multiple owners of M&S stores. In a time of unprecedented change for retailers, and the stores they trade from, it is surely vital that all landlords “get involved”. 

As telling as it was ironic, two of the largest owners of retail in the UK were not present at the lunch at all…

Andrew is a Partner with 10 years prior experience in the leisure investment sector. He has bought and sold over £1 billion leisure assets, including some of the largest ‘mixed-use’ schemes in the UK