Long-awaited clothes recovery at M&S but more time needed
Comment Martin Flanagan
The rollercoaster of Marks & Spencer’s shares yesterday was understandable. At first the stock rose 6 per cent as M&S’S clothing arm achieved a same-floorspace sales rise of 2.3 per cent in the quarter to end-december – the first like-for-like increase in nearly two years. But after more reflection the shares closed up just 1.3 per cent after the market took on board four significant factors that chastened the initial cheer. The retailer was up against pretty dire comparators in the same period of 2015; M&S benefited from five extra trading days this time round; it made no promises that the clothing recovery would be sustained in its fourth and final quarter as it said the costs of its turnaround plan would result in “negative periods”; and consumer spending power is expected to fall in 2017 due to a slowing economy and a freeze in real-time wages.
Even with these caveats, however, M&S did not alarm the market by the gloom associated with rival Next last week. And we have got so used to associating M&S with a feeling of indifferent performance and malaise for so long that any sense chief executive Steve Rowe has got his finger on the pulse is welcome.
Rounding off a more positive picture, the group’s food business unveiled a 0.6 per cent rise in sales in the latest quarter including the key festive period.
Rowe said the better clothing outturn had been due to better ranges, better availability and better prices, but as his two predecessors, Marc Bolland and Lord Stuart Rose, had said for well over a decade that they were addressing these issues as well the jury will remain out for now.
It would be churlishly ignorant to dismiss the good M&S performance as a false dawn. But more positives will be needed to persuade that the group is now truly on the right track. After several years of deflation and price wars with discounters, three of the Big Four supermarkets are making discernible progress in recovering their mojo.
Tesco posted a 0.7 per cent rise in UK festive like-for-like sales yesterday. Morrisons delivered sales up 2.9 per cent. And even though Sainsbury’s 0.1 per cent rise was more pedestrian that became 1 per cent after the 4 per cent sales boost from its Argos acquisition. Asda lags.