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M&S boosted by clothing sales rise

Published 02/04/2015

Marks & Spencer said customers responded to changes in
Marks & Spencer said customers responded to changes in "product quality and styling"

Marks & Spencer boss Marc Bolland said the retailer was "trading with self confidence" after its clothing division registered its first rise in sales in more than three years.

But Mr Bolland refused to say that the under-pressure retailer had turned the corner after notching a 0.7% lift in like-for-like sales at its general merchandise arm - a quarterly figure stronger than City expectations.

The retailer's shares surged 6% in the FTSE 100 Index as it said customers had responded to changes in "product quality and styling" and after it sold more full-price items.

The company's food business also saw like-for-like sales in the 13 weeks to March 28 rise by 0.7%, helped by record Valentine's sales.

The group said its spring and summer collections have been well received, including its much talked about 1970s-style suede skirt worn by TV presenter and model Alexa Chung.

It also said its Autograph and Limited Edition brands sold well, with both almost notching up double-digit total sales during the period.

Mr Bolland said: "We have been bang on trend."

The M&S boss has been under increasing pressure to turn around the clothing business, which until today had experienced sales declines for 14 quarters in a row.

The retailer's performance has stuttered despite turnaround efforts including a multi-billion pound investment drive, the hiring of new fashion executives and a celebrity-driven marketing push.

Annual profits have fallen for three years in a row and were recently overtaken by rival Next, although the City forecasts M&S will improve profits in the 2014/15 financial year to £641 million from the £623 million seen in 2013/14.

Analysts at Citi boosted their full-year forecast by £10 million to £650 million as a result of the positive update.

The retailer's progress in clothing was partly disrupted by more stock going into the Christmas sale as a result of the unseasonal conditions through the autumn and winter season.

Analysts had expected the retailer's general merchandise unit to report a 1.2% fall in like-for-like sales.

Mr Bolland said: "This is a step by step approach. We are particularly pleased today that our gross margins are also improving."

The firm also said that its online sales returned to growth of 13.8%, with its traffic numbers and customer satisfaction ratings continuing to improve since distribution problems impacted Christmas trading.

The retailer said the specialist positioning of its food business continued to deliver results in a deflationary market, caused by ongoing supermarket price wars. The business said it introduced more than 350 new products during the period.

Lewis Sturdy, a dealer at London Capital Group, said: "Bravo, is the shout across the desk as Marks have pulled their socks up, shares in the British retailer booted up as it posed its best non-food sales performance in nearly four years."

On the downside M&S said its international sales fell 3.8% over the period due to macro-economic issues in Russia, Ukraine and Turkey as well as the weakening euro.

But the retailer said it did not expect the fall in international sales to hamper the group's performance when it reports full-year results on May 20.

Brewin Dolphin analyst Nicla Di Palma said: "Overall, this was a really good set of results and the increase in like-for-like sales in the general merchandise division was really unexpected."

She added: "It is worth noting that M&S is still losing market share in general merchandise and it is too early to say whether this is the start of a new chapter in M&S's history."

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