Food continues to star at Marks & Spencer

By Mike Stones

- Last updated on GMT

Related tags Retailing Commerce

Food sales continue to outshine general merchandise at M&S
Food sales continue to outshine general merchandise at M&S
Food continues to outshine clothing at posh retailer Marks & Spencer (M&S), according to the firm’s first quarter results, covering the 13 weeks to June 29 2013.

Total UK food sales climbed by 4.5%, while like-for-like food sales were up by 1.8%.

But general merchandise like-for-like UK sales fell by 1.6% during the first quarter. The category – which included clothing, footwear and homewares – recorded its eighth consecutive quarter of falling sales.

Shore Capital analysts Clive Black and Darren Shirley concluded: “M&S Food is in good shape with strong in-store execution.” ​The retailer’s food business ranges were “demonstrably better and reflected in sound share gains”, ​they added.

But falling general merchandise sales continued to give cause for concern. “This remains a disappointing albeit in-line figure to our minds with M&S still losing share,”​ said Black and Shirley.

A key concern remained the retailer’s weak performance in clothing – particularly ladieswear. “We acknowledge the understandable concern on behalf of investors surrounding the ongoing underperformance of the core ladieswear category in the UK,” ​they said.

“The performance has been unacceptable for a sustained period of time and the management machinations have not been wholly constructive. As such, there is pressure on the forthcoming autumn/winter range to make progress for M&S.”

‘The knives might come out’

If the new range failed to revive the flagging fortunes of M&S’s clothing business, the position of M&S boss Marc Bolland would become vulnerable, a retail analyst at Kantar retail told BBC Radio 4’s Today​ programme. “If it comes to Christmas and clothing still hasn’t recovered, the knives might come out for Mr Bolland,”​ said Bryan Roberts.

Black and Shirley noted that M&S was due to complete its infrastructure upgrade within the next nine months, leading to capital expenditure falling from £800M/year to about £550M/year.

Also, the retailer opened its new £200M London Gateway​ distribution centre, serving the UK and western Europe, on the Thames estuary last month.

So, M&S shareholders could look forward to a “demonstrably more rewarding time”​ if falling capital expenditure corresponded with steps forward in trading profitability.

Shore Capital retained its ‘buy’ advice on M&S stock.

Bolland claimed the general merchandise business showed some improvement in the quarter, while “the food business delivered another excellent performance, continuing the strong underlying trend”.

Customers chose the retailer as the destination shop for special occasions and everyday quality they can trust, he added.

M&S will report its half year results on November 5 2013.

Subdued performance

Meanwhile, the British Retail Consortium-KPMG Retail Sales Monitor for June revealed a subdued performance in June with little volume growth and sales values rising only in-line with inflation.

In the three months from April to June, food like-for-like  sales fell by 0.7% with total sales up by 1.3%.

“For the big supermarket groups, this remains problematic with online and convenience gaining share alongside deep-discounters and premium players,”​ said Black and Shirley.

Manufacturers and retailers will be hoping the recent hot weather – aided by sporting successes in tennis and rugby – will help to boost the figures for July.

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