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Marks & Spencer shares drop after first quarter sales decline, driven by troubled clothing division

Marks & Spencer's first quarter improved on the previous three months, helped by Easter falling later in the year, reduced discounting in its clothing division and growth from Simply Food openings
M&S
M&S says it is increasing its food ranges and delivering more promotions

Marks & Spencer Group plc’s (LON:MKS) first quarter sales fell, weighed down by its troubled clothing division, a competitive market and weak consumer spending.

UK sales dipped 0.5% on a like-for-like basis in the 13 weeks to 1 July, driven by a 1.2% decline in the clothing and home business.  Like for-like food sales edged down 0.1%.

Shares in M&S dropped 1.27% to 334.70p in early trading. 

However, the results marked an improvement on the fourth quarter when the retailer reported a 3.6% decrease in UK like-for-like sales, including a 5.9% slump in clothing and home and a 2.1% fall in food. 

M&S first quarter meets its expectations

Chief executive Steve Rowe said trading in the first quarter was in line with the company’s expectations and M&S left its full year guidance unchanged.

“I am pleased that we continue to grow full price sales in clothing and home, with reduced discounting and no clearance sale in the quarter,” he said. 

“In our food business, we delivered strong growth from new Simply Food openings, and are prioritising better ranging and stronger promotions."

Since being appointed to the top job last April, Rowe has been working to turn around the struggling clothing division by shaking up the managment team, investing in quality and lowering prices to entice customers. 

Given the fierce competition in the grocery market and a slowdown in consumer spending due to inflationary pressures, M&S is also investing in its food division by increasing its food ranges and delivering more promotions. 

M&S earlier this month brought back its £10 meal deal, which includes a main, side dish, dessert an a bottle of wine. The deal returned with more options, including two different cuts of steak.

Group revenue rose 2.7% to £2.5bn during the period, or 1.8% at constant currency.

UK revenue increased 2.6% to £2.2bn, with a 0.5% drop in clothing and home to £852.1mln and a 4.5% rise in food to £1.4bn. International revenue climbed 3.8% to £272.3mln but fell 4.0% in constant currency as the company closed 28 of 53 stores in the owned markets it plans to exit.

M&S benefits from Easter falling later in year

The timing of Easter gave results a boost, helping to increase revenue growth in food by an estimated 0.7% and in clothing and home by about 0.6%.

Nick Bubb, retailing analyst and consultant at The Daily Retailer, said the drop in clothing and home sales was broadly in line with consensus expectations but this was helped by Easter sales. 

"On an Easter adjusted basis the fall was 1.8%, which is not so good, even though M&S trumpet the fact that full-price clothing and home sales were actually 7% up overall in the first quarter, on the back of reduced promotions," Bubb said. 

"The bears will seize on the 0.8% fall in Easter adjusted food sales like-for-like as evidence of cannibalisation caused by all the Simply Food store openings, although M&S confine themselves to the comment that 'We are focused on tightening execution through improving ranging in store and on delivering stronger promotions in a competitive market'."

 

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