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Weather dampens M&S clothing sales

Published 07/07/2015

Marks & Spencer posted a drop in quarterly clothing sales
Marks & Spencer posted a drop in quarterly clothing sales
Chief executive Marc Bolland has been under pressure

High street giant Marks & Spencer suffered a setback in its clothing sales recovery after colder May weather impacted demand for its new spring and summer collections.

The retailer said its general merchandise like-for-like sales fell 0.4% in the 13 weeks to June 27, having risen by 0.7% in the previous three months, which ended 14 continuous quarters of decline.

But the quarterly sales fall was much less than the 1% slide the market was expecting, and compares with a 1.5% fall the general merchandise unit suffered a year ago. The group's general merchandise unit is largely made up of clothing sales.

The group's like-for-like food sales lifted 0.3% during the period, compared with a 1.7% rise a year ago, with the retailer describing the unit as delivering "another excellent quarter."

The retailer, which launched 700 new food lines during the period, continues to see its high-end items outperform the grocery market, which is locked in a supermarket price war.

However, shareholders still reminded the under-pressure chief executive Marc Bolland that he still has work to do, with 6% of them at the firm's annual meeting at Wembley Stadium in London today voting against his re-election.

Mr Bolland said: "We continue to make progress against our key priorities. Our food business did very well in a difficult market. In general merchandise, sales were broadly level on last year and we are on track to deliver the planned increase in gross margin."

He also welcomed plans to relax Sunday trading hours that Chancellor George Osborne is expected to announce in tomorrow's summer Budget.

Mr Bolland said that although his firm had not heavily lobbied for this change, some of his stores in London might benefit from this proposal.

The group also said in its first quarter trading it will launch a £150 million share buyback programme for investors, which is due to begin tomorrow.

In May, M&S turned a corner by posting its first annual profits increase in four years.

The firm reported underlying profits for the year to March 28 rose 6.1% to £661.2 million, beating City expectations, and easing some of the intense pressure its chief executive Marc Bolland has been under in recent years.

Mr Bolland took over at M&S in 2010 and during his tenure he saw rival Next overtake the annual profits haul at his business.

Under his leadership, M&S has poured billions of pounds of investment into the business to try to turn around its fortunes, while clearing out its top fashion team, and recruiting celebrities for high-profile marketing campaigns.

Yet sales at the beleaguered general merchandise division continued to crumble - with 14 quarters in a row of like-for-like declines until a 0.7% lift in the previous quarter.

Items such as a much-talked about 1970s-style suede skirt worn by TV presenter and model Alexa Chung have helped improve the image of Marks's clothing range.

Although the group has delivered another fall in general merchandise sales in this quarter, it is less than half the slide brokers had feared.

Also, its food sales continue to grow in one of the most difficult grocery markets in decades.

It said it was on track to open around 90 Simply Food stores this year.

The group suffered delays before Christmas after the relaunch of its online service M&, but it said the operation has made good progress since then.

It said online sales jumped 38.7% during the period. It said: "M& sales were very strong, albeit against a soft post-launch comparative."

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "Whilst the statement contains little to shoot the lights out, it seems that there may be signs of some positive momentum now being established."

He added: "However, the elephant in the changing room remains, in the form of general merchandise.

"Whether M&S can ever return to former glories by enticing clothes shoppers back to its stores is arguably its largest challenge, even though the more recent experience implies at least a stabilisation of previously dropping numbers."

Mr Bolland told shareholders at Wembley that in clothing, the group expected to improve its margins by designing more of its apparel. He said it currently designs 35% of its clothing, but by the end of the year this will have risen to 50%.

However, one female shareholder who had been a designer for M&S for 25 years until the mid 90s, thought its new design team "needed to go back to the drawing board".

She said: "I could weep at some of the things I see. Prints are ugly and vulgar. Why are necklines always too low? Why are polonecks always too high?"

She said she was a size 12, but could often fit into M&S sizes ranging from 8 to 16. She added: "That is because everything is cut the same, and they just sew different labels on the clothes at the factory."

Her comments raised laughter and applause from the meeting.

M&S chairman Robert Swanell relpied: "You have a great range of experience, but I don't recognise the blanket criticism you gave. Our customers are coming back to us. We will keep on improving."

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