Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

M&S shares retreat on drop in UK food and clothing sales over Christmas

The retailer reported a 1.4% drop in total UK like-for-like sales in the 13 weeks to December 30
Food sales dipped 0.4% over the period

Marks & Spencer Group PLC (LON:MKS) said a squeezed consumer led to a decline in food sales and warm weather in October hurt clothing sales in Christmas trading.

The retailer reported a 1.4% drop in total UK like-for-like sales to £2.8bn in the 13 weeks to December 30.

READ: M&S long-run earnings unlikely to grow, says Goldman Sachs as it cuts target price

Shares fell 4.6% to 309p in morning trading.

In the upmarket grocery arm, like-for-like  food sales dipped 0.4% to £1.6bn as hard-hit consumers tightened their purse strings, though price investment before Christmas and a strong performance from seasonal lines buoyed late trading.

Higher inflation – fuelled by slump in the pound following the Brexit vote – and weak wage growth have weighed on households’ disposable incomes.

Weak clothing market

A slowdown in consumer spending has hit the UK retail market, adding pressure on the company’s already struggling clothing division.

Like-for-like sales in the clothing and home business fell 2.8% to £1.2bn during the 13-week period.

Under chief executive Steve Rowe’s leadership, M&S has been working to turnaround the clothing division by improving ranges and lowering prices.

The strategy helped clothing revenue to rise in-store and online in the weeks leading up to Christmas without having to discount items in a highly promotional market.

However, an unseasonably warm October resulted in an overall decrease, meaning M&S carried more stock into its December sale.

International revenue fell 9.8% to £309mln as the company completed the planned closure of loss-making stores.

Group sales edged down 0.1% to £3.1bn.

Full year forecast unchanged

M&S left its full-year guidance unchanged.

"M&S had a mixed quarter with better Christmas trading in both businesses going some way to offset a weak clothing market in October and ongoing underperformance in our Food like-for-like sales,” said Rowe.

“We continue with the accelerated transformation programme we outlined in November and have recently taken several important steps to reshape the business for the future.

“These include a new technology partnership and organisation, and the sale of our Hong Kong based business in line with the streamlined franchise-led model we are adopting for International."

What analysts think

Neil Wilson, senior market analyst at ETX Capital, said: "As expected Marks and Spencer suffered a bad fall in sales over the Christmas quarter - badly lagging competitors on all fronts - and as such there could be serious question marks over Steve Rowe’s turnaround strategy."

He added: "Food is the worry – it’s been the easy win for M&S for years but suffered a -0.4% LFL decline. Other grocers registered solid increases and crucially may be eating into M&S’s premium niche – we have seen strong performances for Morrison’s, Sainsbury’s and Tesco’s premium ranges. And Waitrose – probably its closest apples-to-apples rival in food - saw LFL sales +1.5% (or +2.2% if you factor in New Year’s Eve). Food store expansion will stay on hold."

Liberum repeated a 'sell' rating on the stock, saying the success of the turnaround strategy remains uncertain with a backdrop of structural pressures persisting.

"Any turnaround will be a tough and lengthy process given the structural issues that the business continues to face," it said.

View full MKS profile View Profile

Marks and Spencer Group Plc Timeline

Related Articles

Flying Brands
July 17 2018
“We look forward to the future with confidence and excitement," said Flying Brands boss Trevor Brown.
H&T Pawnbrokers store
July 02 2018
Last year the company saw gross profits jump 45% thanks to a booming personal loan book and robust sales of luxury second-hand watches and jewellery.

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use