M&S ‘revival’ lacking spark
MARKS & Spencer shares tumbled yesterday as the City gave the thumbs down to the latest set of subdued trading figures.
The company reported another slide in sales despite tentative signs that the clothing ranges are finally ending their downward spiral.
Shares gave up early gains to close the day down 3pc – making M&S the biggest faller in the FTSE 100.
The reaction from investors, only days after Goldman Sachs told clients the High Street bellwether was a ‘conviction sell’, piles pressure on chief executive Marc Bolland as he approaches the end of his three-year plan to rejuvenate the firm.
One analyst said the figures were ‘anaemic’ in comparison to competitors such as Next, but others welcomed signs of a revival in crucial womenswear ranges.
M&S said sales in the UK between January and March were 0.2pc lower than in the same period last year. It posted its eleventh consecutive fall in non-food sales, which slipped 0.6pc, but it made the unusual move of breaking out clothing sales, which grew by 0.6pc.
‘So many of the questions were focused on clothing, so we decided to separate it out,’ said Bolland.
Clothes, especially womenswear, have been a source of frustration f or t he company. Bolland’s revamped clothing team has been beset by defections, including former Victoria’s Secret boss Janie Schaffer who had been brought in to revitalise lingerie but left just months later.
Customers have also complained that racks were often left empty, depriving them of the latest ranges, amid problems in the company’s logistics and back- office operations.
M&S launched its autumn-winter collection early last year in a bid to boost sales.
The latest spring-summer range has been accompanied by a series of adverts featuring Emma Thompson and Annie Lennox. But the company was forced to slash prices to prop up sales as rivals offered deals to woo bargain hunters. M&S said margins would be 0.2 percentage points lower than last year. Bolland said revamping its website had hit business although total online sales still rose 12.5pc.
Food sales rose by 0.1pc, with Bolland saying that these reached record levels around Mother’s Day and Valentine’s Day when stores offer special meal deals.
He said M&S has pledged to match prices on potatoes and water with major supermarkets, but denied that the group would be pulled into a grocery price war.
‘Around 41pc of customers want something for the same evening,’ he said. ‘This plays into our favour because not everybody will be focused on price.’
John Stevenson, an analyst at Peel Hunt, said: ‘While management can point to slight improvements in clothing performance, the pace and scale of recovery continues to lag competitors.
‘We have seen Next double its sales guidance range for the year ahead, a level of performance and execution unlikely to be matched by M&S. In comparison to competitors, and Next in particular, per- formance looks anaemic.’ But f i nance director Alan Stewart insisted that shareholders are ‘absolutely behind the strategy’.
Shares fell 14p to 442p – wiping £200m off the value of the company – but remain 15pc higher than this time last year.
Analysts at Morgan Stanley said that the improvement in clothing sales was ‘hardly a stellar performance’ but added: ‘This is the first positive figure in clothing in almost three years and does suggest that the new management team may be making progress.’