M&S’s sales trend improves, sees tough 2010

M&S’s sales trend improves, sees tough 2010

London: British retailer Marks & Spencer posted an improvement in its quarterly sales trend and raised its forecast for full-year profit margin, but cautioned 2010 was likely to be a tough year.

M&S, which sells clothes, homewares and food from over 600 stores in Britain and 285 abroad, said on Wednesday sales at British shops open at least a year fell 0.5% in the 13 weeks to 26 September.

That was the eighth quarterly fall in a row, but also the best performance for two years and at the top end of forecasts for a fall of between 0.5% and 2.2%.

“Whilst there is more visibility in the marketplace and consumers appear more confident, we continue to be cautious about the outlook. We expect 2010 to be a tough year," executive chairman Stuart Rose said in a statement.

M&S has been hit hard in the recession, losing ground to cheaper rivals like Primark in clothes and supermarkets in food.

On Wednesday, online fashion retailer ASOS posted a 47% rise in first-half sales.

Still, M&S’s performance has been better than analysts had feared, helped by new products, price cuts and promotions, and its shares have outperformed the DJ Stoxx European retail index by 46% this year on hopes of a recovery.

A British retail survey on Tuesday supported signs of an upturn. But official data for August were flat and a string of industry executives have warned of a tough year ahead with unemployment and taxes set to rise.

M&S, Britain’s biggest clothing retailer, said its full-year gross margin should fall by 50-100 basis points, better than previous guidance for a fall of 125-175 basis points thanks to better stock control, sourcing and supply chain management.

KBC Peel Hunt analyst John Stevenson said he was likely to raise his full-year profit forecast by about 10% to £550 million ($877 million).

But he noted some analysts had already increased their estimates following better than expected trading updates from competitors like fashion chain Next.

One trader said M&S shares were set up open about 8 pence higher, while another called them down 2 pence.

Analysts expect M&S to make a full-year profit of £540 million, according to Reuters Estimates, down from 604 million in 2008-09, but up from a 2009-10 consensus of 471 million six months ago.

M&S said like-for-like sales fell 0.8% in general merchandise, which includes clothing, and were flat in food.

International sales were up 9.6% and total group sales for the quarter were up 2.7%.

M&S shares closed at 374.8 pence on Tuesday, valuing the business at about £5.8 billion.