SHARES in Marks & Spencer (M&S) closed 3p down yesterday despite rallying in early morning trading after the retailer revealed the impact the difficult Christmas trading period had on its business.
Total group sales fell by almost 4% to £3 billion over the three months to the end of December, while in the UK like-for-like sales were down 2.2% to £2.9bn. Within that, food sales were down by 2.1% while income in the company’s clothing and home department fell by 2.4%.
The business said that November sales in particular had been hit by a combination of “reducing consumer confidence, mild weather, Black Friday, and widespread discounting by our competitors”, resulting in “a very challenging trading period”.
Despite this, chief executive Steve Rowe said that performance over the 13-week period as a whole had been “steady”, particularly when viewed against “the backdrop of well publicised difficult market conditions”.
“Our food business traded successfully over Christmas as customers responded to improved value. Our transformation programme remains on track,” Mr Rowe added.
Despite the decline in revenues, analyst Neil Wilson said the company’s numbers were “a little better than expected”, although he added the main reason for that was simply that they were “not as bad as forecast”.
“Not as bad as feared - a good microcosm of the high street in general over Christmas - but Marks clearly has a long way to go to turn things around,” he said.
“So far [M&S has not shown] a significant sign of improvement but against a tough backdrop and in the depths of a turnaround it’s too early to write it off. Marks has been here before and come out fine.”
Investors took a more cautious view, with the company’s shares closing 1% down at at 274.5p after initially dropping to 272.9p then rising as high as 284.5p when the market opened.
According to the trading update, M&S’s online business performed well during the three months, with a 14% increase in online sales in its clothing and home division helping mitigate the impact of the company’s ongoing store closure programme. Last year the company announced that it would be closing 100 shops by 2022 as part of a strategy aimed at generating a third of all sales online.
In Scotland, the branches on Falkirk High Street and in the Plaza shopping centre in East Kilbride were shut down as part of the first tranche of closures.
“Our Clothing & Home online sales performance was strong, with UK revenue up 14%, supported by an increased focus on digital marketing together with improvements to our delivery proposition and our operations at Castle Donington,” the company said in its trading update.
“Womenswear online growth significantly outperformed, driven by areas including dresses and knitwear reflecting our ‘Must-Haves’ and social media campaigns.”
The company said it had also benefited from a planned reduction in stock carrying levels, which minimised the impact of discounting in the run up to Christmas.
The retailer had 25% less stock going into the December sale period than in the previous year, its lowest “stock into sale” level for five years.
The company said it was making “good progress” in terms of re-engineering the “range and value proposition” in its food business, a process it began six months ago.
“The underlying trend reflects the transition to trusted value as we lower prices and remove complex and confusing multi-buy promotions,” it said.
“There are early signs of volume growth and we expect to see more momentum under a strong new management team as the year progresses.
“Customers responded well to our Christmas ranges and campaign resulting in solid volume growth over the Christmas period, with the majority of stores delivering like-for-like revenue growth.”
The company, which said its guidance for the full financial year “remains unchanged”, confirmed that it will report its final results on May 22.
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