Bloomberg News

M&S Squeezed by U.K. Lingerie War as Grocers Sell Satin: Retail

February 06, 2013

For Valentine’s Day, shoppers at British supermarkets are putting an extra something into their basket along with candy hearts: luxury lingerie.

J Sainsbury Plc is selling a 22-pound ($35) satin underwear set in coral and cream as the third-biggest U.K. grocer goes upscale in unmentionables in an attack on Marks & Spencer Group Plc’s grip on Britain’s underwear drawers. Wal-Mart Stores International Plc’s Asda chain is adding wider ranges in bigger sizes alongside novelty pajamas and onesies.

“Sainsbury has taken the upmarket route and Asda has clearly done a good job improving quality and perception,” said Bryan Roberts, an analyst at Kantar Retail, which provide retail analysis. “With their improved ranges, they are establishing credibility in an area previously dominated by M&S,” the biggest seller of undergarments in the country.

Intimates have been synonymous with Marks & Spencer since the retailer first started offering them in the 1920s, so ceding ground makes a turnaround of the whole company more challenging. Chief Executive Officer Marc Bolland has posted six straight quarterly declines of general merchandise sales as he fails to lure fashion-seeking customers.

Since Bolland’s arrival at the company, the stock has trailed behind peers, advancing 2.5 percent, while the FTSE All- Share General Retailers Index increased 12 percent. The U.K. market for lingerie, pajamas and hosiery is worth $6.9 billion, according to Verdict Research, which estimates the division accounts for 32.9 percent of Marks & Spencer’s clothing sales, and 12.4 percent of its overall U.K. revenue.

Lost Loyalty

“This highlights the importance of the sector and how the retailer continues to rely on underwear sales,” said Honor Westnedge, a retail analyst at Verdict. “It has come under increasing pressure from the grocers.”

Given the importance of undergarments, Bolland can scant afford to keep losing shoppers like Magdalena Zawadazka. After buying discount clothing for her nieces and nephews at her local Asda, the 26-year-old waitress has been cheating on Marks & Spencer for quick top-ups of her lingerie drawer at the supermarket.

“The quality is really good, it has my size and it really lasts,” she said, flicking through the racks to choose between a plunge bra and a black t-shirt bra, both priced at 8 pounds. She used to buy her “basics” at M&S.

Sales Slippage

The defection is already having an impact on Marks & Spencer, whose market share slipped 0.5 percentage point to 30.9 percent of the womenswear lingerie market by value, a bigger share than its total stake in the clothing market, according to Kantar Worldpanel data for the 52 weeks ended Dec. 23 seen by Bloomberg News. Asda’s been among the biggest gainers, increasing 0.6 percentage point to 6.7 percent, while Sainsbury has added 0.2 point to 1.8 percent.

Sainsbury has increased the amount of selling space dedicated to underwear by 20 percent in more than a third of its outlets in the past two years after identifying it as a key part of its growth. Indeed, spending on clothing as a whole at grocers rose twice as fast as at dedicated clothing retailers in the six months ended Nov. 12, according to Kantar Worldpanel, a market analyst and data provider.

“Our mantra is high-street quality at supermarket prices,” James Brown, Sainsbury’s director of its clothing unit, said in an interview.

Lingerie has grown from 5 percent of Sainsbury’s clothing sales to 8 percent, with the company expecting it to account for 10 percent in the medium-term. The grocer’s general merchandise business, which includes apparel, is growing three times faster than Sainsbury’s food business, the retailer has said, though it doesn’t disclose total revenue for clothing.

‘Halo Effect’

“Lingerie is a core, regular purchase, much like fruit and vegetables in Spanish supermarkets,” said Dan Murphy, managing director at Alvarez & Marsal, a business advisory firm. “Women come in to buy new lingerie and whilst they are there they will take a look at other categories and browse the store. So it’s critical to get the lingerie offer dead right.”

For Asda, whose core customers are mothers doing their weekly shop, the focus is on offering a wide range, having availability in all its sizes from A to G cup, and building on its nightwear range with onesies and 9-pound novelty pajamas.

Asda (WMT:US) customers come in to “buy our childrenswear and we do see a halo effect” on lingerie, Helen Connolly, head of Asda’s buying for womenswear and lingerie, said in an interview.

At Asda, bras cost between 4 pounds and 14 pounds, with its 6-pound range being the best-selling. Marks’ cheapest non- discounted bra on its website is a padded plunge t-shirt bra for 9 pounds in cup sizes A to D.

“We want to be big for smalls, whether it’s mens, kids or childrens,” Connolly said, using a British word for lingerie.

Victoria’s Secret

Bolland isn’t taking the renewed push lying down. M&S hired Janie Schaffer, the former chief creative officer of Victoria’s Secret (0124919D:US), known for its televised fashion shows where models parade down catwalks while serenaded by pop stars such as Justin Bieber and Rihanna. She started last month, M&S said.

It has also boasted of the success of its Autograph lingerie range designed by supermodel Rosie Huntington-Whiteley, which sold more than 100,000 pieces since the end of August, making it one of the fastest-selling ever. Marks & Spencer declined to comment further.

“When there were only two or three retailers, one of them was M&S and that’s where you got your lingerie,,” said Simon Irwin, a retail analyst at Credit Suisse in London. “Supermarkets have given a lot of time, energy and space to clothing and it works very well for them, so they will be taking market share.”

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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