Marks & Spencer continues to experience its worst ever period in a long history. But it can console itself with the knowledge that it is not the only major retailer currently struggling in the sector.
Despite a multitude of new initiatives, including new formats apparently inspired by highly successful US chains such as Gap and Banana Republic, M&S has seen its share price drop sharply over the past few months.
But last week’s interim results from Storehouse – the holding company for Bhs and Mothercare – and a profit warning from Arcadia, have seen shares plummet across the entire sector. A fall in shares at Debenhams, Next and Allders suggest the market is in need of a drastic revamp.
The report which accompanies Storehouse’s latest set of figures says: “The highest operational priority in the business is to improve store standards”. In addition to increased and better staffing, the group wants to introduce clearer layouts. But a company spokeswoman is unable to comment on whether any design consultancies have been, or are about to be, appointed to work on new formats for either brand.
Storehouse’s chairman Alan Smith says: “Following a wide ranging review, we are taking radical action to reposition Bhs and Mothercare. This represents a fundamental change to the way these businesses operate, with new approaches to merchandise, formats, values and service.”
In May, Storehouse decided to develop Mothercare in three formats – Mothercare World stores (more than 929m2), Mothercare stores (up to 929m2) and Mothercare Direct, the home shopping division. The programme to transform the largest stores into “world class” shops was accelerated and 68 of the chain’s smaller outlets earmarked for closure.
With 47 of the 68 outgoing stores now sold, a further 14 have been identified for closure. The number of Mothercare World stores, designed by 20/20, now stands at 11, with eight completed since May and “performing well”, according to Storehouse’s latest results. Over the next three to four years, a further 40 Mothercare World stores are due to open, both as new sites and relocations.
Yaron Meshoulam, business development director for 20/20 says: “We did the interiors, in-store communications and facades for Mothercare World two years ago. It is going well and we are currently working on other elements.”
The last project the London consultancy did for Bhs was an out-of-town site at Fosse Park, near Leicester, which opened a year ago. Although 20/20 is not currently working with Bhs, both parties maintain links. But Meshoulam is unable to comment on any possible future work for either Mothercare or Bhs.
Until March this year, London design consultancy Hodgkinson & Co spent 15 months working on Bhs Homestore, the chain’s home furnishings brand, which runs parallel with the main Bhs stores.
Hodgkinson & Co managing director Andrew Hodgkinson says retailers in the clothing sector have been “badly hit” in recent years, but believes struggling companies have a straightforward choice to make.
“People are now very price-conscious [as a result of] the recession,” he explains. “Retailers in the middle, like Bhs and M&S either have to trade up or trade down. Bhs has chosen to trade down, which was almost inevitable with the onset of [competition from] companies like Wal-Mart and the Internet.”
Hodgkinson thinks that Bhs and Mothercare will survive in the long run, but accepts changes need to be made. “Formats will be adjusted, but they will continue to be major brands on the high street. There is a huge amount of goodwill towards them, but the companies have got to get the environment right, the service right and the product right. All are reliant on each other.”
However, Corporate Intelligence senior retail analyst Steve Davies questions whether trading down will really be the solution for Bhs. “I don’t think anyone would miss it if it wasn’t there. Bhs’ strength is its heritage. Its homewares are strong, but its clothing range has never been particularly focused,” he says.
“By trading down it will come into competition with Asda’s George range and other strong lines, so you have to ask if it is a viable route for Bhs. Once you’ve made that move it’s difficult to come back up. A clearer store format may help but it won’t solve the problem. Bhs needs to inject more aspiration into its clothing range,” adds Davies.
The involvement of Iceland in Bhs’ new Food Store venture could be a wise move, according to the analyst. But he believes it is too early to speculate on its possible success, having opened on 2 November in Birmingham. Designed by a combined in-house team from Bhs and Iceland, Bhs aims to roll out the new format to a further ten stores by the end of the current financial year and to over 100 sites in total.
“Iceland is the most sensible partner for this project, as it is experienced in this sector. But the Food Store isn’t yet proven, and there is lots of high street competition from groups like M&S and Tesco Metro,” he says.
Davies is more optimistic about Mothercare’s chances, “as long as it can get out of its high street sites without big expense. Mothercare World has a strong format and good authority. Mothercare itself has strong authority in its section of the market, but it needs to get things moving quickly.”
Storehouse’s recovery plans for Bhs and Mothercare include a “major restructuring” of the business, allowing each group to operate as an independent company. But unless they both address the real demands of consumers, no amount of restructuring or recovery plans will be able to save two of the UK’s most well-known high street brands. Just ask M&S.