Marks and Spencer clothing sales down again
Marks & Spencer said today that its grip on the UK clothing market was still weakening after sales declined for the seventh quarter in a row.
Like-for-like sales fell 5.4% in the 14 weeks to July 9, with M&S needing a return to growth at its food department to rescue it from a heavier fall.
Clothing and homeware sales slumped 11.2% in a first quarter showing labelled as “pretty grim” by M&S boss Stuart Rose and much worse than City fears.
Despite the slump, M&S shares rallied 3% today as Mr Rose insisted the underlying picture was healthier with prices now lower and 40% less stock in its summer sale – due to start 18 days later than last year.
Analysts insist the jury remains out on whether Mr Rose will revive the struggling retailer, which fought off a £9.1bn (€13.1bn) approach from Bhs tycoon Philip Green a year ago tomorrow.
As well as competition from Bhs and Mr Green’s Miss Selfridge-to-Dorothy Perkins business Arcadia, M&S is being squeezed by discount retailers and smaller rivals that deal in “fast fashion” and can respond to changes in fashion trends swiftly.
M&S conceded today that it was still losing market share, although Mr Rose said the rate of decline was slowing.
Figures from FashionTrak for the period to the end of May show M&S accounted for 10.2% of all womenswear sales in the UK – down from 10.9% a year earlier.
Mr Rose said: “I’m not distraught about where we are today. It’s sort of the place where you would expect to be.
“The environment outside is very tough and our job is to deliver better quality sales. Our plan for this year was never predicated on top-line growth.”
He drew encouragement from the fact that sales of clothing at full prices fell by just 2.4% in the period – compared with a double-digit decline in the third quarter of its last financial year.
UK retail sales fell by 3.1% overall in the period as the impact of a 10.3% slump in sales of general merchandise was cushioned by a 5% uplift in demand for food.
Shares in M&S rose as investors also latched on to the fact that margin targets and expectations of £260m (€376m) in cost savings this year were unchanged.
Seymour Pierce analyst Richard Ratner said the decline in sales of clothing and homewares was “chronic”, but he refused to cut his £680m (€985m) forecast for M&S profits this year because of the benefits of fewer mark-downs, additional discounts from suppliers and cost cutting.
Mr Ratner said: “The market appears to be giving Mr Rose the benefit of the doubt. However, we feel that he would do well in the next few years if he steadies the top line – rather than grows it.”
Mr Rose said today’s figures, showing a faster decline in sales of general merchandise, reflected “the significant change in our trading stance compared with this time last year” when the aim was to shift a glut of stock.
M&S no longer started each season with masses of stock and hoped it sold. Instead, new products were being introduced weekly to guarantee “newness” and give shoppers a reason to keep visiting its stores, he said.
On a like-for-like basis, food sales rose 0.7% after falling 3.1% over the previous three months and Mr Rose said this sector was proving resilient in the face of the high street spending slowdown.
Tony Shiret, of broker Credit Suisse First Boston, said the improvement in food sales should not be regarded as a decisive turnaround, especially as rival supermarkets with similar customers have also done well during this period.
A better assessment of the impact Mr Rose is having on M&S would come in the second half when his signature autumn and winter ranges reach stores.
But Mr Shiret said the second half would need to be a lot better than the first six months if M&S was not going to warn on profits again.
“Clearly sales declines of this order of magnitude make achievement of consensus forecasts a stretch even allowing for the buying background,” he said.
