Why axing cut-price clothing is sparking an M&S revival
MARKS & Spencer declared its turnaround was on track after it scrapped 27 promotions and convinced shoppers to splash out on its latest fashions.
Boss Steve Rowe said his plans to revive the retailer would gather pace after he saw sales of clothes sold at full-price soar by 7pc.
And despite clothes sales continuing to fall overall, the big falls of previous years look to have been stemmed.
However, shares fell 4.7pc, or 15.9p to 323.1p, as investors were spooked by a surprise 0.1pc drop in food sales.
M&S has been opening dozens of its Simply Food outlets around the country and Rowe said this had led to a decline in sales at some of its larger existing stores. This was backed by figures which revealed food sales rose by 4.5pc to £1.4bn in the first quarter, showing how customers have flocked to newly opened shops.
Clothing and home sales across stores open for more than a year dropped 1.2pc in the three months to July 1 – a fall less pronounced than some analysts had feared. This compared to a 5.9pc fall in the final quarter of its last financial year.
Rowe, who has implemented a number of measures since he took the helm in April 2016 – including cutting back on promotions and ditching poor-selling ranges to turnaround its business – said the results demonstrated the strategy was on track, but warned: ‘It doesn’t mean we are complacent, there is a lot more to do.’
The retailer removed 27 promotions in the quarter and put back the launch of its summer clearance sale until this week.
Rowe, 49, said the sale would have added 2pc to its like - for- like performance had it been introduced earlier. But he vowed to stick with the strategy and not simply cut prices to woo occasional shoppers.
He has been fighting critics since he took over when he slashed prices on 2,400 clothing lines and cut jobs – affecting the firm’s bottom line. M& S reported a 63pc plunge in profits when it announced its fullyear results in May after the costly restructuring took its toll. Laith Khalaf, senior analyst at Hargreaves Lansdown, said: ‘The fact that things are on an improving trend at least vindicates the decision to reduce promotional pricing, which should improve margins.’
But the fall in food sales was a ‘disappointment’.
The M&S results came as industry figures showed a pickup in sales growth in June with the arrival of summer. Like-forlike sales rose by 1.2pc com- pared to the same month last year according to the data from the British Retail Consortium and KPMG. The report said the growth in retail spending was mainly the result of higher food prices with shoppers more cautious about splashing out on non-essentials.
Khalaf said: ‘overall conditions for high street retailers remain pretty grim. M&S is swimming quite hard against this tide, so it deserves some credit for treading water.’