TikTok triumph for M&S: Retailer set for £500M profits after staff social media videos and Tom Holland voicing Percy Pig deliver festive boom with clothes up 3% and food up 12% – as Tesco sees 9% rise on pre-pandemic sales
Marks & Spencer’s financial turnaround was today put down to the retailer connecting with younger shoppers with TikTok – with annual pre-tax profits on course to hit £500million after its strongest ever Christmas for food sales.
Bosses at the high street stalwart hailed a ‘strong’ Christmas and said the major transformation plan launched two years ago is leading to better results as the group posted a 9 per cent jump in sales for the past three months.
M&S – whose shares have nearly doubled over the past year – outperformed the market in food, with its financial update providing evidence that one of Britain’s most elusive retail turnarounds in history could finally materialise.
Market analysts today put the excellent results down to the ‘correlation between an active marketing strategy and commercial success’, saying M&S had ‘used the creative capability of TikTok to reach a younger demographic’.
Among the campaigns highlighted for praise was its ‘This Is Not Just a Christmas Song’ videos on TikTok of staff in Romford, East London, who were filmed dancing and singing around the store in a series of popular clips.
The ‘mandsromford’ TikTok account posts a series of dancing videos, comedy clips and covers of songs that have proven to be a huge hit over the past year – and they now have more than 1.5million likes and 60,000 followers.
Staff at ‘Team Romford’ say starstruck customers have asked for their autographs after they recreated trends from the app’s viral sounds as well as creating clips using the store’s mascot Percy Pig and a charity Christmas single.
In addition, the retailer lured in more younger customers with Hollywood A-lister Tom Holland after the 25-year-old Spider-Man star voiced sweets character Percy Pig in a TV advert as part of M&S’s bumper festive campaign.
The group has also focused its marketing efforts on families as it seeks to reshape its aging customer bases after a tough two years for many retailers, blighted by enforced store closures and trading restrictions.
M&S sold one pair of Percy Pig pyjamas every two minutes in the run-up to Christmas, while it also shifted more than a million Light Up Shortbread Tin Houses and its Goodmove activewear saw sales rise 118 per cent on 2019.
Sales rose by 8.6 per cent to £3.27billion over the 13 weeks to January 1, compared with pre-pandemic levels, and M&S said it was now on track to post a pre-tax profit of ‘at least £500million’ for the current financial year.
Growth was driven by its food, but the previously-troubled clothing and home operation – which has been the retailer’s problem area for a number of years – reported a jump in sales for the second successive quarter.
Another supermarket reporting results today was Tesco, which had a 0.3 per cent rise in like-for-like sales over the six weeks to January 8 compared with a year earlier. On a two-year basis, it saw UK festive sales jump 8.8 per cent.
As for M&S, Chartered Institute of Marketing chief executive Chris Daly said: ‘Marks and Spencer’s positive results perfectly demonstrate the correlation between an active marketing strategy and commercial success.
The video for a Christmas song by the Romford store was called This Is Not Just A Christmas Song and became a TikTok hit
The ‘mandsromford’ TikTok account posts a series of dancing videos and covers of songs that have proven to be a huge hit
Marks & Spencer’s financial turnaround was today put down to the retailer connecting with younger shoppers with TikTok
‘The British retailer’s significant investment in Christmas campaigns, alongside its twist on traditional marketing techniques, is now paying dividends.
‘M&S has successfully taken advantage of new, social led opportunities, using the creative capability of TikTok to reach a younger demographic.
What M&S products were popular pre-Christmas?
- 1.6million activewear products under the Goodmove label now sold annually, with sales up 118% on 2019
- Most popular lines including ‘squatproof’ leggings (£25) in new prints such as blue mix leopard
- Reflective items including women’s lightweight reflective running jacket (£45) also very popular
- Knitwear and jumpers up 5% with £19.50 lambswool crewneck and £79.00 cashmere crewneck top of the bestsellers
- Denim sales increase by 12% – with £19.50 Sienna Straight Jeans proving popular
- Bras up 13% on two years and 40% on last year with more customers having in-store personal fit service
- Two of top three best selling seasonal products were brand new for 2021 – Light Up Shortbread Tin House was one of them with more than one million sold
- Plant Kitchen orders up 147% on Christmas Food to Order service – top sellers including £15 Vegan Beef Wellington and £4 Vegan duck croquettes
- Plant Kitchen Tikka Curry and Hot & Spicy Pizza become popular upon their launch this year, joining No Chicken Kiev and Cauiflower popcorn
- Dairy sales including milk and cheese up 12% on two years
- Everyday products top of bestsellers including M&S Gold Tea and Easy Peeler Oranges ranges
- Champagne and sparkling sales up 3% and 2020 with Prosecco up 6% and Rose Prosecco up 52%
- Beauty gifts lift total gifting up by 50% against 2020
- Apothecary range is now a £20million plus brand
- Nightwear is one of the biggest gifting categories up 25% on two years.
- Family pyjamas were very popular with 30% of sales across the Christmas Gift Shop – and Percy Pig charcoal Pyjamas selling one pair every two minutes
‘The retailer’s ‘This Is Not Just a Christmas Song’ placed its Romford store staff on centre stage – through putting real employees at the heart of campaigns, it has received praise from a range of celebrities, influencers and consumers.
‘Now, with the upcoming launch of its ‘Sparking Change National Challenge’ – encouraging customers to try a lower carbon diet – it is evident that M&S is not looking to rest on its laurels, with its marketing push set to continue into 2022.’
And Laura Hoy, equity analyst at Hargreaves Lansdown, said: ‘Marks & Spencer’s strong top-line growth is a product of its strategy shift with less discounting in Clothing & Home and an improvement in online sales.
‘Food has become a much larger slice of the pie, so the fact that it delivered double-digit growth was encouraging.
However, shares in M&S fell by 6 per cent this morning after the financial results were revealed, and Ms Hoy added: ‘Any excitement over M&S’s strong third quarter sales is somewhat tempered by management’s minimal profit guidance increase. There’s a chance that this kind of sales growth won’t be sustained in the coming year – particularly if inflation makes consumers wary.
‘We think M&S is well-placed at the higher end of the spectrum, but it’s not immune. M&S stock has climbed markedly higher since the start of the pandemic, and it will take a lot more than a nudge to profits to sustain those expectations.’
Steve Rowe, chief executive of the London-based retailer, which is recovering from a decade of decline, said the clothing operation saw ‘robust online’ growth amid positive demand for Christmas gifts.
Overall clothing and homeware sales rose by 3.2 per cent to £1.08billion for the quarter against 2019 levels – well above market expectations of a 0.9 per cent fall – spurred by a 50.8 per cent leap in online sales.
The FTSE 250 company also said that food sales jumped 12.4 per cent for the period, as its Simply Food and retail park shops continued to surpass expectations.
It added that the figures represented its strongest Christmas ever for food sales.
Mr Rowe said: ‘Trading over the Christmas period has been strong, demonstrating the continued improvements we’ve made to product and value.
‘Clothing and home has delivered growth for the second successive quarter, supported by robust online and full price sales growth.
‘Food has maintained its momentum, outperforming the market over both 12 and 24 months.
‘The market continues to be impacted by the headwinds and tailwinds that we reported in the first half, but I remain encouraged that our transformation plan is now driving improved performance.’
Spider-Man star Tom Holland was recruited by M&S to voice Percy Pig in the retailer’s Christmas advert last year
Shoppers continued to return to M&S for fashion and homeware as the retail giant hailed a ‘strong’ Christmas (file image)
The retailer said it now expected full-year profit before tax and adjusted items to be ‘at least’ £500 million compared to previous guidance of ‘about’ £500million.
Tesco keeps on 13,000 temporary workers due to surging Covid absences
Tesco has revealed that around 13,000 temporary Christmas staff have been kept on to help it cope with staff absences due to Covid-19 as the group increased its earnings outlook thanks to a strong festive performance.
The UK’s biggest supermarket said nearly half of the 30,000 temporary staff taken on over Christmas have been hired until at least the end of January as it battles with surging staff sickness levels due to the Omicron variant.
Chief executive Ken Murphy said absence levels had been higher than normal over the past six to eight weeks, but were ‘manageable’ and well below those seen in the early days of the pandemic.
His comments came as Tesco reported a 0.3 per cent rise in like-for-like sales over the six weeks to January 8 compared with a year earlier, when trade was boosted by coronavirus lockdown restrictions. On a two-year basis, it saw UK festive sales jump 8.8 per cent, though Tesco added that recent trading was also buoyed as Britons chose to stay at home more due to the spread of Omicron.
The group said the better-than-expected trading has put it on track to deliver full-year retail operating profits slightly above its previous guidance of between £2.5billion and £2.6billion – its second upgrade in less than four months.
But the group warned of rising food prices as its costs have nearly doubled to 5 per cent, with customers already seeing a 1 per cent increase over the past 19 weeks. Mr Murphy said: ‘It’s possible we’ll see some further inflation on food, but we’ll do our very best to minimise the impact on customers.’
The trading update also covered Tesco’s third quarter and showed UK like-for-like sales lifting 0.2 per cent in the 13 weeks, while the wider group saw growth of 2.4 per cent and a 3.2 per cent increase over the festive period to January 8.
Tesco has joined a raft of retail rivals in raising its profit expectations, with close rival Sainsbury’s lifting its profit outlook yesterday, helped by a 0.1 per cent sales rise over the six weeks to January 8.
Mr Murphy said: ‘Despite growing cost pressures and supply chain challenges in the industry, we continued to invest to protect availability, doubled down on our commitment to deliver great value and offered our strongest ever festive range. As a result, we outperformed the market, growing market share and strengthening our value position.’
It comes after M&S brought children’s favourite sweet Percy Pig to life through animation for the first time to celebrate the launch of its Christmas food ranges.
It hired Tom Holland, who reappeared as Spider-Man in the third instalment of his franchise last month, to voice the porcine character.
In the ad, Percy came to life after a swing of the wand by a fairy played by another well-known British actor, Dawn French.
The pair then roamed an M&S foodhall store, with the company showing a variety of new products including a triple-chocolate panettone and ‘golden-blond Christmas pudding’.
That highlighted the continued growth of the Percy Pig brand, which brought around £50million in revenue for M&S over the past year before the festive season, compared with around £20 million three years ago.
M&S Food director of marketing Sharry Cramond had said the company felt a need to try and ‘bring some magic’ to people’s Christmas celebrations after the pandemic ruined many customers’ festive plans last year.
M&S Clothing also launched a musical festive advert showing off a range of clothing, encouraging customers to have an ‘anything but ordinary’ Christmas, continuing its marketing slogan from earlier last year.
The M&S results come one day after Sainsbury’s vowed to keep prices low as it upgraded its profit forecasts on the back of bumper Christmas sales.
As an upbeat week for the British retailers continued, the country’s second biggest supermarket said yesterday that it now expects profits ‘of at least £720million’ for the financial year to March 31.
That is 9 per cent higher than its previous forecast of £660million, and more than double the £356million it made last year.
The supermarket cashed in as families celebrated Christmas with luxuries. It sold a record 21.5million bottles of champagne and other sparkling wine in the six weeks to January 8. Shares jumped 3.1 per cent, or 8.7p, to 288p.
But chief executive Simon Roberts said this year will be ‘tough’ as the country faces a cost of living crisis. He vowed to make low prices a ‘key priority’ and doubled down on its promise to match German discounter Aldi on 150 core products.
It comes as the Bank of England expects inflation to hit 6 per cent by spring while analysts have warned that the energy bill price cap could jump by more than £700 in April. National insurance rates will also rise in April, costing taxpayers an extra £12billion.
And the average shop is becoming more expensive, with grocery prices 3.5pc higher in December than a year earlier.
Aldi and Lidl this week pledged to remain the lowest priced grocers in the UK, setting the scene for a price war.
Retail analyst Richard Hyman, at consultancy TPC, said: ‘Because price inflation is going to outstrip wage inflation and there are going to be price rises, the good news for consumers is that competition is so intense it will not be that easy to put prices up. Aldi and Lidl will make sure everyone is kept on their toes.’
The M&S financial results showed strong performances across business divisions when compared to pre-pandemic levels
Sainsbury’s, which has 1,411 stores and 189,000 staff, said its promise of a Christmas dinner as cheap as Aldi’s poached shoppers from rivals.
What did M&S say about the performance of each part of its business?
‘Sales increased 12.4 per cent, with sales excluding hospitality and franchise up 16.4 per cent. Retail parks and Simply Food stores continued to outperform.
‘Encouragingly, the larger basket sizes we saw in the first half continued through the Christmas period as customers used M&S for more of their everyday shopping. As a result, M&S was the fastest growing major store-based Food retailer in the period. The business generated its highest ever Christmas sales with December growth in line with the performance for the quarter. In addition, although not included in these numbers, M&S products performed strongly on Ocado.com, representing c.30 per cent of baskets in December.’
CLOTHING AND HOME
‘Clothing & Home sales increased 3.2 per cent. Full price sales grew by 45 per cent as we maintained our trusted value trading stance, reducing the amount of product sold on promotion by 66 per cent and stock into sale by 21 per cent compared to 2019/20. Online sales continued to be strong, with growth of 50.8% supported by substantial expansion of instore fulfilment. Store sales were down 10.8 per cent on 2019/20 with retail parks up, continuing to outperform stores in city centres.’
‘International sales increased 5.1 per cent, with online sales more than doubling. Performance was driven by Clothing & Home growth in the Republic of Ireland and key markets such as India after Covid related restrictions were eased. In addition, we generated strong growth through online marketplaces and in franchise shipments to the Middle East.’
Grocery sales in the six weeks to January 8 were 0.8pc higher than Christmas 2020 when sales were buoyed by lockdowns. They were up 6.8 per cent on pre-pandemic levels.
Mr Roberts said it had its ‘biggest ever new year’. It expects to report at least £720million in profit for the year ending in March, £60million more than forecast.
UBS analysts expect the grocer, which accounts for 15.4 per cent of the market, to have sold £29billion of food and other goods in the year.
Analysts revealed on Tuesday that M&S was Britain’s fastest growing food retailer in the key Christmas quarter.
M&S’s grocery sales soared 9.4 per cent in the final 12 weeks of 2021 from the same period in 2020, while Aldi hailed its ‘best ever’ Christmas after sales jumped by 0.4 per cent last month compared with December 2020.
And the British arm of Lidl revealed that its sales rose 2.6 per cent in the four weeks ending December 26, 2021 year-on-year as it benefited to the tune of £21million from shoppers ditching other food retailers.
Market researcher NielsenIQ said M&S was the fastest growing supermarket at the end of last year- while Tesco was the best performer of the ‘Big Four’ grocers, with its 0.1 per cent sales decline significantly outperforming Sainsbury’s, Asda and Morrisons which had falls of 4.2 per cent, 3.1 per cent and 5.6 per cent respectively.
NielsenIQ did however also say M&S had weaker comparative sales numbers than the Big Four in 2020. It added that UK shoppers spent £7.1billion at supermarkets in the two weeks to Christmas Day, up from £6.7billion in 2020.
This comes after many families wanted to make the most of Christmas 2021, one year after much of the population was under strict Tier 4 restrictions which banned household mixing.
Britons were also delighted that festive celebrations could go ahead last month despite weeks of fears over another lockdown amid the rise of the Omicron variant – although Wales and Scotland did eventually bring in some restrictions on larger gatherings.
There had also been fears over food shortages due to the supply chain crisis and a lack of lorry drivers – with many shoppers getting key items months in advance and Aldi selling 1,500 frozen turkeys a day as early as October.
Budget rivals Aldi and Lidl – which both operate without a significant online business – have grown rapidly over the last decade, forcing Tesco, Sainsbury’s Asda and Morrisons to cut prices and compete more aggressively.