Doubts over M&S turnaround plans after latest fall in clothing sales
- Credit: Archant
Marks & Spencer’s beleaguered clothing arm has suffered its worst sales performance for more than a decade, fuelling fears over the turnaround plans of new chief executive Steve Rowe.
The retail giant posted an 8.9% plunge in first quarter like-for-like sales in its clothing and homewares division, as it cut back on promotions amid a “weak market”.
It marks the worst performance by the group’s general merchandise business since the corresponding quarter in 2005, when its then chief Stuart Rose – now Lord Rose – was struggling to turn around clothing sales after taking the helm to fend off a takeover bid from Sir Philip Green.
Mr Rowe, who took took over from Lord Rose’s successor Marc Bolland in April, blamed the figure on moves to reduce promotions and shift the company’s summer sale into July as part of his turnaround strategy.
He said sales were also hit by a “weak market” amid pre-Brexit vote jitters on the high street, while the timing of Easter wiped around 0.8% off clothing and home sales growth.
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Mr Rowe said: “Consumer confidence weakened in the run-up to the EU referendum. While it is too early to quantify the implications of Brexit, we are confident that our strategic priorities and the actions we are taking remain the right ones.”
The group’s food arm fared slightly better, with like-for-like sales down by 0.9% in the 13 weeks to July 2, of which 0.5% was due to the timing of Easter, while total comparable UK store sales were 4.3% lower overall.
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Mr Rowe added that they were “not the numbers I want to see” but were “the numbers I expected to see” after the group axed 28 promotions under a plan to instead lower every day prices. The shift in promotions reduced like-for-like clothing and home sales by 5%, according to M&S.
However, while M&S stuck by its full-year profit expectations, some analysts were not convinced, questioning whether cutting back on promotions is the right approach given the post-Brexit threat to consumer confidence.
Richard Lim, chief executive of Retail Economics, said: “M&S’s clothing figures are painfully weak and fail to stem the loss of market share to other more agile multichannel competitors. Its tireless efforts to revive the struggling clothing business have failed to resonate with its core customer base.”
Liberum analysts said the first quarter update was “very poor” and cut their M&S profit forecasts by 4.6%, pencilling in a drop to £567m, having already trimmed their prediction following the Brexit vote.
Freddie George, retail analyst at Cantor Fitzgerald, said M&S shares would remain an “unloved” stock, having already plunged by a third in the past three months. “We still have concerns that the company will not be able to reverse the declines in general merchandise ,” he said.
However, Peel Hunt’s retail team offered some cheer. They said: “Headline sales falling by 9% looks like the stuff of nightmares, but adjusting for Easter and the late timing of the summer sale, underlying declines of 4% are at the better end of our expectations.
“Progress is being made on a tighter promotional stance, encouraging given the high levels of mark down activity on the high street.”
Mr Rowe warned when unveiling his overhaul strategy in May that there would be no quick fix in the battle to revive the general merchandise business. He pledged to cut every day prices for nearly a third of its clothing ranges, while boosting staff numbers on the shop floor.
At the heart of his revamp is a plan to win back “Mrs M&S”, its once loyal army of women shoppers aged 50 and over, who he said have been “neglected” in recent years.