18th July 2012
So it was sheer bad luck that it revealed details of its new products on the very day that HSBC, which provides the financial and operational backing for M&S Money, hit the headlines for money laundering activities. It has been involved with Mexican drug cartels and Saudi banks with suspected links to terrorism. HSBC's head of compliance David Bagley is now the bank's former head of compliance following his resignation at a US Senate hearing.
The linking of M&S with this week's bank in maximum disgrace (last time it was Barclays and Libor, the week before RBS/NatWest and the computer crash) will do little to convince customers of other banks that it is worth the effort of switching.
Packaged accounts the M&S way forward
But leaving HSBC aside, the account details are far from the banking revolution earlier media comment had promised. It is simply another "packaged account" which so troubles the Financial Services Authority.
Earlier this month, Mindful Money reported that "trusted brands" including Britain's biggest supermarkets and retailers such as Asda and M&S "might be smelling blood with the latest LIBOR scandal, and keen to muscle in by creating their own banking products." Mindful Money then asked: "But is this simple smoke and mirrors?"
The answer to that question is probably "yes" if the majority of comment on the new account has any validity. And it comes just a week after M&S unveiled poor figures with management changes in its core fashion business, leading to yet another raft of articles on where "our favourite retailer has gone wrong."
For investors, there is no clear answer other than the share price has halved over five years. At 324p, it now stands substantially below the 400p level at which Sir Phillip Green attempted to buy the company in 2004.
Analysts dictate their doubts
Analysts cited in Retail Week are frank about the firm's problems following the poor first quarter sales. Here are some of their comments.
"The ongoing outperformance of food is making M&S a structurally lower gross margin business. Clothing still accounts for roughly half of profits, however, so issues there are in need of a solution and the management changes are thus positive, but most don't occur until October, so it is very early days." Investec analyst Bethany Hocking
"M&S's problems in womenswear go far beyond the weather, as they are clearly losing market share. M&S desperately needs some stability in top management, but chief executive Marc Bolland is fighting for his own job, so he has, somewhat predictably, made poor Kate Bostock, the head of M&S Clothing, the scapegoat for the poor first quarter trading." Independent analyst Nick Bubb
"Overall this is a very weak set of numbers that is explained only in part by poor trading conditions on the high street; the rest of the explanation comes down to issues that are specific to M&S. Indeed, the trading period covers some more robust months of overall retail growth and M&S's figures compare relatively badly with competitors operating across similar sectors.
Moreover, the results for general merchandise are set against comparatively subdued numbers last year demonstrating that M&S has gone from a position of standing still, to one of moving backwards." Conlumino managing director Neil Saunders
"Although the shares continue to trade at a significant discount to their historical average valuation, we continue to rate them Hold as we wait for staff moves to settle down and for signs that weakness in general merchandise (for example loss of clothing market share) has been arrested. We prefer to recommend buying shares in Next instead, and in the mid cap space, NBrown, Asos or Dunelm." Panmure Gordon analyst Jean Roche
Need for better customer service
Away from the analysts, individual customer experience is poor. An M&S shopper who purchased a £99 jacket found a manufacturing fault when he returned home. He took it to his nearest M & S the next day where, far from apologising or even compensating him for the problem and the time spent in dealing with it, the "customer service" person told him not to moan as he might have brought the garment back anyway. She also claimed it was "creased". That may be a one-off but, if tweeted, it multiplies in an environment where the store is already on the defensive.
Comment on the new bank account – it officially starts at 20 selected branches in October – will do little to restore M&S to its one time position of 100 per cent positive consumer love. Media serving its key demographic – Daily Mail and Daily Telegraph – have been negative or non-committal.
There are no few accounts, instead there is a packaged account, available at £15 a month (£180 a year) or at £20 a month (£240 a year) including travel insurance. Account holders have to deposit £1,000 a month. M&S says the value of the packages are £337 and £582 respectively – more if acc
ount holders use an M&S credit card as well.
Free drinks for account holders
The first £127 of the deal consists of 48 cups of free hot drinks in M&S cafés. There are also "treats and delights vouchers" (unspecified) worth £45 a year plus money off vouchers on M&S goods. The account is clearly designed to ensure holders shop in the stores.
The annual family travel insurance (for those up to age 70) is valued at £245 a year but only costs £60 a year extra. While there is devil in the detail of all insurance policies and what they cover – the M&S plan includes grandchildren – the comparison site confused.com shows annual travel cover for two adults and two children starting at £37.44 a year with most policies priced between £60 to £100.
Savings and mortgages
There is a premium interest savings account but restricted to £250 a month for one year. This is worth up to £96 but as anyone who can afford to deposit £1,000 a month is likely to be a taxpayer, that is really only worth £76.80 (less for better off M&S customers on higher rate tax).
M&S intends to offer mortgages later on. But no matter how they are priced, the initial reaction to the current account offering has to be – as with the clothing and customer service – "must try harder".
And until there is clear evidence of a turnaround in the nation's shopping affections, then M&S faces a future with a declining demographic.
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