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Marks & Spencer bucks retail gloom with sales rise

Marks & Spencer bucks retail gloom with sales rise
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First Published: Wed, Jul 13 2011. 03 56 PM IST
Updated: Wed, Jul 13 2011. 03 56 PM IST
London: Marks & Spencer bucked the gloom in British retail, posting a seventh consecutive quarterly rise in underlying sales as its older and more affluent customers coped better with a squeeze in disposable incomes and warmed to innovation.
Marc Bolland, chief executive of Britain’s biggest clothing retailer, which also sells homewares and upmarket foods, said on Wednesday British consumer confidence, although low, had not deteriorated over the past two months.
“What we are seeing is that people are keen to protect their summer holidays and therefore are reducing their spend in some areas, they are cutting back on dining out,” he told reporters.
This was playing to M&S’s strengths in premium food, where 500 new products were launched during its fiscal first quarter, including a new Italian range and more healthy eating options.
M&S said in a trading update ahead of its annual shareholder meeting that sales at British stores open over a year, excluding VAT sales tax, rose 1.7% in the 13 weeks to 2 July.
That compared with forecasts for a rise of 1-2%, according to a company poll and a fourth-quarter rise of 0.1%. Like-for-like general merchandise sales, spanning clothing, footwear and homewares, were flat, while food sales were up 3.3%.
“M&S has delivered a good performance in challenging conditions,” said Bolland, whose strategy is focused on product innovation, as well as expanding online and abroad.
“For us, we bring out new things but we bring innovation out with a very strong price as well, the combination of those works very well for us,” he said.
M&S said it had won 0.2 percentage point of market share in clothing, marking 17 consecutive months of gains, and 0.1 point in food.
The 127-year-old group, which serves 21 million Britons a week from around 700 stores and has over 350, mainly franchised, stores overseas, said its guidance for 2011-12 was unchanged, even though it, like rivals, started its summer sale early.
“We just followed the market but we were certainly not the first one in (a sale), we were one of the last ones in,” said Bolland.
The first quarter included a strong April when trade was boosted by warm Easter weather and spending ahead of the Royal Wedding, a more subdued May and a June boosted by the sale, which started two weeks earlier than last year.
M&S shares were down 2.2% at 365 pence at 03:15 pm, valuing the business at about £5.7 billion ($9 billion). That fall followed a strong performance by the stock on Tuesday and reflected disappointment the company had not performed even better in the first quarter.
“Given how good April was, plus the earlier summer sale, we had hoped for more like 2% like-for-like (growth) in general merchandise in Q1, ... but the outcome is only flat (ex-VAT), which is a bit disappointing,” said Arden Partners analyst Nick Bubb.
In common with a raft of other retailers, M&S said trading conditions would stay tough due to pressure on consumers’ incomes and high commodity prices.
“Against the uncertain economic backdrop, we are focused on trading through the short term, while building for the long term growth of the business,” said Bolland.
As well as working to improve M&S’s product offer, stores, marketing, logistics and technology, he has made key appointments to his management team.
British shoppers are grappling with rising prices, subdued wages growth, a lack of credit, job insecurity, a stagnant housing market, government austerity measures and fears of interest rate rises. This has led to a recent spate of retail failures and more are expected.
Retail sales showed sluggish year-on-year growth of 1.5% last month with demand for big-ticket items remaining weak, an industry survey found on Wednesday, adding to worries about second-quarter GDP growth.
Elsewhere in the retail sector, luxury group Burberry beat forecasts for first-quarter sales, while fast-growing British fashion chain SuperGroup posted an 89% rise in full-year profit.
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First Published: Wed, Jul 13 2011. 03 56 PM IST
More Topics: Marks & Spencer | Homewares | Foods | Sales | Britain |