M&S steps up convenience store roll-out

LONDON Tue Oct 22, 2013 1:05pm EDT

LONDON Oct 22 (Reuters) - Britain's Marks & Spencer will step-up expansion of its Simply Food store network as it looks to benefit from growing consumer demand for smaller, convenience outlets, it said on Tuesday.

Updating on plans for its food business in an attempt to balance to the narrative on M&S, which has been focused on its struggling general merchandise business, the firm said it would open 150 more Simply Food stores in the next three years.

The plans represent more than double the number of Simply Food stores currently opening each year. The firm currently has 427 such stores across the UK, which stock food and drink and also typically have a bakery and cafe.

Local convenience store channels are growing at about 20 percent a year in Britain, which together with online represents the industry's two fastest growth categories.

Sainsbury's, Britain's No. 3 grocer, is currently opening convenience stores at a rate of one or two a week.

Half of M&S's new Simply Food stores will be operated with the firm's franchise partners in locations like motorway services and hospitals, with the remaining being owned, high street and retail park stores.

M&S also said it had agreed a new franchise partnership with Relay France to open 10 food stores at travel hubs in and around Paris by 2018, with the first opening next summer.

The firm's head of food Steve Rowe reiterated that M&S has no plans to offer core foods online, despite some analysts believing that changing customer demands make it inevitable the group will eventually offer such a service.

Though M&S does sell flowers, wine and party food online, by January, when Wm Morrison is due to enter the online grocery market, M&S will be the only large British grocer without a full internet grocery service.

While M&S' general merchandise division, spanning clothing, footwear and homewares, has posted eight straight quarters of like-for-like sales declines, its upmarket food business has enjoyed 17 consecutive quarters of underlying sales growth and contributes 54 percent of group revenue.

With a strategy focused on product quality, provenance, innovation and availability as well as investment in a new food hall format, M&S's food business has been growing ahead of the wider market and is now Britain's seventh largest grocer with a share of just under 4 percent.

Shares in M&S were broadly flat at 488.3 pence at 1457 GMT.

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