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Current Position:Home » News » Marketing & Retail » Retail » Topic

M&S relies on food sales for growth as clothing struggles

Zoom in font  Zoom out font Published: 2013-04-12  Origin: Reuters  Views: 32
Core Tip: British retailer Marks & Spencer posted a seventh straight quarterly fall in underlying sales of clothing and homewares, having to rely on a strong performance from its food business to deliver overall growth.
Marc Bolland, chief executive of the 129-year-old retailer that has recently been the subject of takeover speculation, is under pressure from shareholders to revive its clothing operations.

He has said that a new general merchandise management team led by John Dixon, the former boss of M&S's food business, and Belinda Earl, the former chief of Debenhams and Jaeger, will not make a major impact on sales until autumn/winter collections hit the shops in July.

An important early test will be the reaction of the fashion press when they see the ranges on May 14, a week before M&S reports 2012-13 results, with analysts forecasting a 7 percent fall in pretax profit to 659 million pounds ($1 billion).

Trevor Green, head of institutional equities at Aviva Investors, an M&S shareholder, said he wants M&S to present a clear strategy for womenswear when it reports results.

"If not, then patience will start to wear thin with shareholders as Bolland has already been given three years to turn the general merchandise side around," he said on Thursday.

Aviva Investors holds 0.1 percent of M&S, according to Thomson Reuters Eikon data.

M&S finance director Alan Stewart said the company had the backing of its major investors.

"What we're hearing directly from shareholders is that they are supportive of our strategy ... and that they recognise it's going to take time," he told reporters.

Shares in M&S rose 3.2 percent after it said sales of non-food products, spanning clothing, footwear and homewares, at stores open more than a year fell 3.8 percent in the 13 weeks to March 30, its financial fourth quarter.

That was slightly better than analysts' forecasts of a drop of between 4 and 6 percent, but matched the fall of the previous quarter when M&S moved to protect profit margins by offering fewer discounts.

"People had got themselves into a very gloomy frame of mind about M&S ahead of this statement, so any non-disastrous news was probably always going to make the shares bounce," one of the ten largest M&S shareholders said.

Last month was the coldest March in Britain since 1962, hurting demand for summer clothes and shoes, according to an industry survey published on Tuesday.

"We held our full price stance for most of the (fourth) quarter but trading conditions became difficult in March and the market became more promotional. Therefore we responded with selected tactical offers," said Bolland.

M&S's like-for-like food sales rose 4.0 percent, ahead of the overall market, analyst forecasts of an increase of 1.9 to 3.5 percent and a third-quarter rise of 0.3 percent.

The food division, which had a record Easter week, benefited from products such as Belgian chocolate mini hot cross buns, of which it sold more than 600,000 packs, and from M&S being untainted by a horsemeat scandal that hurt rivals.

Judgement Day

M&S, which serves 21 million customers a week from over 700 British stores, said total UK like-for-like sales rose 0.6 percent, having fallen 1.8 percent in the previous quarter.

Analysts said the numbers had bought some time for Bolland, who dismissed speculation regarding his own position, saying: "I'm thoroughly enjoying the challenge."

Many UK retailers are finding the going tough as consumers, whose spending generates about two-thirds of UK gross domestic product, fret over job security and a squeeze on incomes.

Separately on Thursday British baby and maternity products retailer Mothercare posted flat UK like-for-like sales in its fourth quarter, while books and stationery retailer WH Smith reported a 5 percent rise in first-half profit.

M&S stock last month hit a 28-month high after a newspaper reported that the Gulf state of Qatar was planning a bid. Neither side has commented on the report.

Bolland said on Thursday that Britain's takeover regulator would have forced them to comment, if there was any substance to the report.

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