What's going on?
UK grocery chain Marks & Spencer (M&S) reported strong annual results on Wednesday.
What does this mean?
The first thing to know about M&S is that it’s fancier than your average grocery store – think more Whole Foods than Walmart. The second thing to know is that its business has been flailing for a while, and it’s been trying everything – cutting costs, investing in ecommerce, expanding its food business – to reclaim its spot on the index of the UK’s 100 biggest stocks. And in its last financial year, it finally edged closer: M&S reported on Wednesday that its revenue rose at its fastest in at least a decade, while its adjusted pre-tax profits were up more than tenfold in the same time.
So you did have to feel sorry for the company when it said it wasn’t expecting this strong business to last, and that its profit would take a hit this year as financial pressures pile up on customers even more.
Why should I care?
Zooming in: Online isn’t the future.
That slowdown is already being felt by Ocado Retail, the joint online grocery offering from M&S and Ocado. M&S earned just £14 million ($17.5 million) in profit from the venture last year – well down from the £79 million ($99 million) of the year before. It doesn’t look like things are changing anytime soon, either: the business issued a profit warning on Wednesday, as well as cut its full-year sales outlook for a second time.
The bigger picture: Inequality, thy name is Britain.
Still, analysts reckon that since M&S’s customers are typically more well-to-do, they’re better placed to absorb the higher prices of quinoa and quail eggs. After all, data out this week showed that higher earners’ salaries are now growing faster than those of lower earners. That’s a sharp reversal from before the pandemic, and suggests inequality in the UK is back on the rise.