UK: M&S boss sees ‘early signs of improvement’ despite further fall in non-food sales

From left, Katie Piper, Nicola Adams, Tracey Emin, Ellie Goulding, Helen Allen, Monica Ali, Grace Co

From left, Katie Piper, Nicola Adams, Tracey Emin, Ellie Goulding, Helen Allen, Monica Ali, Grace Coddington, Dame Helen Mirren, Laura Mvula and Karen Elson who feature in adverts promoting the new fashion ranges at Marks & Spencer. - Credit: PA

Marks & Spencer today posted its ninth consecutive quarterly fall in clothing and homeware sales and warned that consumers remain reluctant to spend.

The retail giant said like-for-like general merchandise sales dropped 1.3% between July and September on a year earlier, better than the 1.6% fall seen in the group’s first-quarter and also slightly ahead of City forecasts.

Like-for-like sales in its food business rose 3.2% in the second quarter, to leave an overall 0.7% first half increase in like-for-like sales, and total sales increased 3.9% to £4.88billion.

But underlying pre-tax profits dropped 8.9% to £261.6million during the six months to the end of September, weighed down by the cost of the star-studded launch of its autumn/winter clothing range.

Chief executive Marc Bolland said its revamp of womenswear was its key priority during the period, and is showing “early signs of improvement”.

But 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.

Under pressure to stem sliding clothing sales, M&S launched its Leading Ladies campaign, featuring a dozen high-profile women including actress Dame Helen Mirren and Olympic boxer Nicola Adams, in September.

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But the chain said the print, billboard and online advertising campaign was pitted against a “challenging” market. It blamed “unseasonable” conditions at the start and end of the half, including a mild September, which it said led to heavier discounting in the marketplace.

M&S said the new clothing range was only in its stores for three weeks of the period, adding that it has also rolled out a more “inspiring” store layout. The company said it is targeting a “steady improvement in performance as our customers begin to notice the changes”.

The retailer said it is “well set up” for its key Christmas period, with more innovation and choice, and its overall expectations for the rest of the year are unchanged.

But it added: “Given continued pressure on disposable incomes, we remain cautious about the outlook for the remainder of the year.”

The retailer hailed a “strong” performance in food, international and its online business. It opened 26 international stores during the half, and expects to open more than 50 during the rest of its financial year.

As well as the clothing launch, its profit margin in the UK was also hurt by a “more aggressive end of season clearance” and the earlier timing of its mid-season sale, which depressed earnings in its general merchandise division.

But margins in its food business increased with better buying and management of promotions helping offset higher ingredient prices.