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Retail: Marks & Spencer fails to halt decline in general merchadise sales

09:26 09 January 2014

Marks and Spencer has suffered another quarter fall in clothing and homewares sales, despite a small improvement in the immedieate run-up to Christmas.

Marks and Spencer has suffered another quarter fall in clothing and homewares sales, despite a small improvement in the immedieate run-up to Christmas.

Marks & Spencer today reported a tenth successive quarterly like-for-like sales decline in its beleaguered homewares and clothing division.

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A 0.5% improvement in the eight weeks to Christmas Eve was not enough to save the division from the deteriorating overall performance for general merchandise, with sales down by 2.1% over 13 weeks to December 28.

And M&S admitted that a series of discounts to drive seasonal sales, which included a pre-Christmas “Mega Day” with reductions of up to 30% on clothing lines, would hit profit margins when full-year results are reported later this year.

Chief executive Marc Bolland welcomed the improved Christmas performance with sales up in a “highly promotional market”.

“However, an exceptionally unseasonal October, which saw GM sales down strongly, has resulted in a quarterly performance below our expectations,” he added.

The sales slump was worse than expected and poorer than the previous quarter, when M&S posted a 1.3% decline.

Mr Bolland is likely to face renewed pressure over the performance, coming more than a year after he began a reshuffle of the brand’s key fashion executives as the store tried to turn around its fortunes.

Food sales continued to grow, with record sales over the Christmas period and a biggest day ever of sales when £64million of M&S groceries went through the check-outs on December 23.

The like-for-like improvement of 1.6% over the quarter compared to 3.2% last time meant even this performance represented a slowdown.

But a 22,7% incrase in online sales, which Mr Bolland said was “strongly ahead of the market”, combined with the increase in food was just enough to take overall sales into positive territory, with growth of 0.2%.

M&S said: “This has been a challenging quarter for the general merchandise market, with unseasonal conditions and higher than ever levels of discounting.

“Against this backdrop, we held our full price trading stance for much of the quarter, but as the level of promotional activity in the marketplace intensified in the run-up to Christmas, we responded with a number of promotions.”

Margins in the general merchandise division are expected to be down up to 0.5% for the year, resulting in the overall margin being flat on the previous 12-month period.

The company said there were “early signs in improvement” in womenswear amid a focus on quality and style, with small market share growth for the first time in three years, and a good performance in coats, dresses and footwear.

Meanwhile, the group boasted that one in four families had enjoyed an M&S turkey on Christmas Day.

Looking ahead, it said the spring/summer collection had been well received, but warned that it remained cautious about the outlook given continued pressures on disposable incomes.

Rival retailer New Look today posted a 1.5% like-for-like UK sales rise over the seven weeks to December 28, putting Marks’s 0.5% improvement over a similar period in the shade, while its web sales were up 62%.

It admitted that it had also suffered a difficult start to the quarter due to an unseasonably warm October, though the company did not post figures covering the whole of the period.

But chief executive Anders Kristiansen indicated that despite extensive discounting across the high street, its strong full price sales performance had protected profit margins - striking a contrast with the hit suffered by its larger rival.

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