Marks & Spencer plc’s (LON:MKS) struggling womenswear division is expected to defy market challenges with a turnaround in first quarter sales on Tuesday but analysts expect the improvement to be short-lived.
Boosted by Easter and a reduced level of promotional activity, Numis has forecast a 1.5% increase in like-for-like sales in the clothing and home business in the first three months of the fiscal year, compared to a 5.9% decline in the fourth quarter.
The retailer’s food sales are expected to rise 1.0% following a 2.1% drop in the last quarter, supported by the timing of Easter and warm weather.
However, M&S is faced with a weak UK retail sector as consumers become increasingly squeezed by rising inflation and stagnant wage growth.
Fellow retailer Debenhams plc (LON:DEB) last month warned of market volatility as it reported a 1% fall in total sales and a 0.9% dip in like-for-like sales in the 15 weeks to 17 June.
In May fashion chain Next plc (LON:NXT) posted a 2.5% drop in total sales in the 13 weeks to 29 April and delivered a grim profit and sales forecast, citing tough trading conditions for UK retailers as consumer spending slows.
Before Brexit led to troubles for the retail sector, M&S was already tackling a slump in its clothing division. In an effort to reshape the business, the company has shaken up the management team, closed stores and revamped its product ranges and prices under chief executive Steve Rowe.
“While the combination of soft comps and calendar effects should result in a solid-looking first quarter result, we retain our negative stance, believing that M&S clothing and home division will prove more difficult and costly to turn around than expected,” said Numis analyst Andrew Wade.
But Deutsche Bank believes the food division is potentially more vulnerable than the clothing unit in the near-term amid an uncertain UK consumer environment.
At its full year sales in May, M&S said it expected input cost inflation would reduce gross margins in its food business, largely in the first half. M&S guided towards UK cost growth of 2.5% to 3.5% as expanded its stores and tackled rising cost inflation.
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