Drop in food sales expected to have impact on store’s figures
MARKS & Spencer is expected to unveil another troubling set of annual figures this week as the high street giant’s food arm comes under intense pressure.
City analysts forecast that like-forlike sales in food could have fallen by as much as 1.1% last year, although consensus estimates put the figure as being down 0.2%.
If comparable food sales come in negative in the fourth quarter, it would represent a year of decline in the division at a time of rapid change in the sector.
The rise of Aldi and Lidl, Tesco’s takeover of Booker, and Sainsbury’s proposed merger with Asda have piled further pressure on a sector grappling with falling consumer confidence and rising costs.
HSBC analyst Paul Rossington said: “We have previously argued that focus on convenience/food-to-go and a premium own-label offer afforded M&S a defensible point of differentiation.
“However, such has been the increase in price competition, and expected increase in competition on premium lines, that the M&S price premium now looks increasingly stretched. Self-inflicted execution mistakes have also undermined range and service.”
M&S has previously described the food arm as exhibiting “ongoing under-performance”, with chief executive Steve Rowe saying he will slow expansion of the Simply Food chain as the group battles to restore its high street fortunes. The retailer’s troubled clothing arm, which includes womenswear, is on course to see like-for-like sales fall by 1.1%.
Graham Spooner, investment research analyst at The Share Centre, said: “The market will be focusing on the performance of the food business given the weak figures in the third-quarter statement in January.
“There have been some encouraging signs that the new management team on the clothing side is having some impact, but investors will be watching sales in particular.”
Wednesday’s results are also set to show that underlying pre-tax profit across the group fell 6% to £573m.
Bottom-line profits are expected to rise substantially from £176.4m in 2017 to £458m, according to HSBC, but last year’s figure was dragged down by charges relating to Mr Rowe’s overhaul. The chief executive is seeking to save costs as part of a five-year turnaround plan also spearheaded by chairman Archie Norman, who joined the retailer in September last year.
M&S has been announcing store closures and shutting distribution centres as part of the efficiency drive.