February 24, 2018

M&S optimistic over turnaround plan despite decline in sales

12 July 2017, 12:42 | Frank Carlson

M&S optimistic over turnaround plan despite decline in sales

Marks & Spencer Q1 Revenues Rise; Says FY View Unchanged - Quick Facts

Rowe added: "I am pleased that we continue to grow full price sales in clothing and home, with reduced discounting and no clearance sale in the quarter".

Chief executive Steve Rowe said the business had clamped down on promotions and had improved full-price sales as part of its turnaround plan.

M&S also axed 27 promotions in the quarter.

"With further changes in year-on-year trading and promotional strategy to come, we do not anticipate a clean LFL trading number to emerge until the fourth quarter of fiscal year 2018", he said.

M&S begins its summer sale on Tuesday, which is a week later than the prior year, and with a "significant" reduction in terminal stock for the season.

However, total United Kingdom sales benefitted from store openings to rise 2.6%, lifting group sales to 2.7%, or 1.8% without any boost from currency moves as worldwide sales rose 3.8%.

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The Q1 figures, which include the Easter trading period, have been described as "disappointing" by financial analysts, who said the retailer's food sales are now falling behind rivals such as Tesco and Sainsbury's. "Overall, the sales numbers are modestly below expectations but the commentary is reasonably encouraging with new Simply Food stores performing well and the increase in full price clothing sales sounding positive for profit implications".

Total sales dipped 0.5 per cent in the same period to £825.1 million, but the retailer hailed a seven per cent growth in full-price clothing sales as it moves away from discounting models.

The drop in clothing sales marks the second consecutive quarter that MandS has failed to meet low expectations, and raises questions over whether Rowe's plan to close 30 United Kingdom stores will be drastic enough in the face of a long-term sales decline.

"In our Food business, we delivered strong growth from new Simply Food openings, and are prioritising better ranging and stronger promotions". Food revenues grew 4.5 percent on a reported basis, but fell 0.1 percent on like-for-like basis.

Despite the slower-than-expected start to the year, M&S Chief Executive Steve Rowe said the company remained on track to recovery.

Global revenue increased 3.8% (down 4.0% in constant currency).

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