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April cyber hack disrupted turnaround momentum

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'Factory to floor' supply chain overhaul underway

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120 million pound investment in automation

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Aims to double fashion, home and beauty online sales

By James Davey

LONDON, Nov 12 (Reuters) - Marks & Spencer ( MAKSF ) is revamping

its supply chain from "factory to floor", the retailer's new

fashion boss told Reuters, as it looks to double annual online

non-food sales to nearly 3 billion pounds ($4 billion).

John Lyttle, who joined M&S as managing director

fashion, home and beauty (FH&B) in March, said the 141-year-old

retailer has regained its footing after a cyberattack in April

paralysed online sales and cost about 300 million pounds in lost

profit.

He said M&S had done a good job re-establishing its value,

quality and style credentials, with FH&B sales up 9% over three

years and market share rising to 10.5% in 2024/25, from 9.1% in

2021/22.

It now needs to focus on becoming a truly omnichannel

retailer, said Lyttle, in his first interview since joining M&S.

"So from where we make our goods, to how we flow that all

the way into our warehouses, how our warehouses operate, and

then how we feed those products out to our customers - whether

that's online, whether that's in our stores," he said.

Simplifying and cutting supply chain costs has been a

priority for many companies after COVID-19, war in Ukraine, Red

Sea shipping disruption and broader global trade upheavals, most

recently due to U.S. tariffs.

MORE LONG-TERM PARTNERSHIPS WITH SUPPLIERS

M&S, which mainly sources products from China, Bangladesh,

India, Pakistan, Vietnam, Cambodia, Sri Lanka and Turkey, wants

to create more long-term partnerships to reduce the risks to

supplies.

While progress has been made in recent years through

consolidating suppliers, M&S has "much more opportunity to go

after through resetting how we buy, unlocking more margin from

our scale, increasing cost discipline and reducing complexity,"

said Lyttle.

The cyber hack knocked what had been a strong turnaround under

Stuart Machin, CEO since 2022, with M&S' 2024/25 profit its

highest in over 15 years and its stock at near-decade highs.

Dominic Younger, fund manager at Columbia Threadneedle

Investments, one of M&S' top 10 investors, said it had made huge

and hard-won strides in fixing the FH&B front-end.

"But one of the most exciting aspects from an investment

point of view is that, together with continuing to drive the

food division, there is so much opportunity out there in terms

of modernising the clothing supply chain," he said.

With a clothing customer base of 21 million, Lyttle said

overhauling M&S' supply chain can double FH&B's online sales

over the long term from about 1.4 billion pounds in 2024/25,

while lifting its online operating margin to double digits.

M&S is also aiming to increase online's share of total FH&B

sales from about 34% to 50% in the medium term, said Lyttle, a

former Boohoo CEO who was also an executive at Primark.

"If you look at our online sales participation today versus

the market, we're about 10 (percentage) points behind," said

Lyttle, noting M&S was even further behind some top competitors,

such as Next.

Next, an early adopter of warehouse and distribution

automation, makes about 59% of its UK sales online.

M&S can increase online sales by optimising the breadth and

depth of its product range, encouraging more customers to use

its more than 1,000 stores for 'click and collect' and returns,

and utilising more channels such as lockers, Lyttle said.

It will also introduce more payment methods and relaunch its

'Sparks' loyalty programme to drive more frequent purchases.

INVESTMENT IN AUTOMATION

Part of M&S' plan is a 120 million pound three-year

investment in automation to increase capacity, reduce complexity

and deliver cost savings worth "multi-millions" of pounds.

M&S is spending 600 million to 650 million pounds on capital

investment in 2025/26 of which between 200 million and 250

million is being invested in technology infrastructure, store

maintenance and upgrades to its logistics fleet.

In its vast Castle Donington warehouse in central England,

M&S is investing in robotic technology that will speed up

sorting 'click and collect' parcels and extend cut-off times for

next-day delivery to nearly midnight.

Further investment at the 900,000-square foot site and

another in Bradford, northern England, will increase boxed

storage capacity by more than 30%.

M&S is also accelerating the implementation of a new

planning platform, with a new merchandising capability already

delivered, automating what was previously largely a manual task.

Cost savings will not need to come at the expense of the

63,000-strong M&S workforce, Lyttle said, adding: "Growing our

business means we're moving more product, therefore we need more

people to help us do that".

CYBER HACK LESSONS

While the cyber hack, which forced M&S to revert to manual

processes, had not changed its strategy or longer-term plans,

important lessons had been learned, Lyttle said.

"It's not just lessons of the actual incident. It's just

general things that we could have done better, or we could have

done faster," he said, without giving away any specifics.

"You don't want people who impacted us at the beginning to

understand in any way," he added.

($1 = 0.7451 pounds)