M&S fashion turnaround 'needs time'
Marks & Spencer said its fashion turnaround needs more time after slumping to its ninth back-to-back quarter of falling clothing and homeware sales.
The retailer's like-for-like general merchandise sales dropped 1.3% between July and September on a year earlier, as a revamp of its autumn/winter clothing range failed to ignite trading.
Heavy discounting and the cost of the star-studded womenswear overhaul helped drag u nderlying pre-tax profits 8.9% lower to £261.6 million during the 26 weeks to the end of September.
But while M&S warned that shoppers remain reluctant to spend, its shares rose as much as 4% as investors took heart at "early signs of improvement" in clothing.
Its general merchandise sales decline was slightly better than City hopes and improved on a 1.6% first-quarter drop.
Chief executive Marc Bolland said the 129-year-old chain is showing "continuous improvement" in clothing , adding that the new range was only in stores for three weeks of the period.
All eyes are now on its pivotal October to December quarter, with M&S due to air its first Christmas advert on TV screens tomorrow during the Coronation Street ad break.
M&S's lacklustre clothing performance contrasted with a 22% hike in annual sales at budget fashion retailer Primark, which also grew profits 44% during the year to mid-September.
Primark's owner, Associated British Foods, said it expects the retailer's performance to improve further.
M&S launched its Leading Ladies advertising campaign, featuring a dozen high-profile women including actress Dame Helen Mirren and Olympic boxer Nicola Adams, on September 12, although some items arrived in stores in July.
The new range was coupled with the roll-out of a more "inspiring" store layout.
But the chain of 766 UK stores said the print, billboard and online campaign was pitted against a "challenging" market.
It blamed "unseasonable" conditions, including a mild September, which it said led to heavier discounting by rivals.
M&S was also forced into "aggressive" discounting to shift old stock ahead of the new range, and also started its traditional mid-season sale earlier. That eroded general merchandise profit margins more than expected.
The high street bellwether said that, while consumer confidence appears to be improving, there is little evidence of this translating into higher spending, adding that it is cautious on the outlook for the rest of the year.
M&S said it is targeting a "steady improvement" in clothing performance.
Mr Bolland said: "This is a journey. We've been clear that people should look at it from season to season."
He added: "What we like to see is a gradual improvement. Our shareholders are very clear on that as well.
"It will take a few collections to get a positive momentum behind it."
Mr Bolland said M&S bought 50% more of items featured in its adverts, and these are 80% sold out.
The retailer added it is "well set up" for its key Christmas period, with more innovation and choice than ever, and its overall expectations for the rest of the year are unchanged. It held its interim divi at 6.2p per share.
M&S also hailed a "strong" performance in food, international and its online business.
Like-for-like food sales rose 3.2% in its second quarter, helped by 160 new product lines.
It opened 26 international stores during the half, and expects to open more than 50 during the rest of its financial year.
Profit margins in its food business increased with better buying and management of promotions helping offset higher ingredient prices.
The group's underlying UK sales increased 1.1% during the second quarter, an improvement on a 0.3% gain in its first quarter, to give a 0.7% first half increase in like-for-like sales.
Total sales increased 3.9% to £4.88 billion during the half.
Investec Securities analyst Kate Calvert said the chain's results lacked "sparkle".
"While food continues to perform, the much awaited womenswear autumn/winter collection is yet to deliver the hoped-for magic," she said.
"Admittedly, the weather may not have helped and all-important Christmas, against weak comparatives, is yet to come."