M&S food in ‘very good place’ but pressure mounts on boss

By Laurence Gibbons

- Last updated on GMT

Food is outperforming general merchandise at Marks & Spencer
Food is outperforming general merchandise at Marks & Spencer

Related tags Shore capital Commerce

Marks & Spencer (M&S) food remains in a “very good place”, although pressure is mounting on the retailer’s boss as the rest of the business lags behind, according to market analysts.

M&S revealed like-for-like food sales were up 0.3% for the 13 weeks to June 27 and sales up 3.2%, as new stores performed well.

But the positive food results highlighted the disappointing performance in general merchandise, according to business recovery firm Begbies Traynor.

“While ceo Marc Bolland will be buoyed by another quarter of steady sales in M&S’s food division, unfortunately the retailer’s general merchandise operation continues to lag behind the competition, disappointing investors,”​ said Begbies Traynor’s ceo Julie Palmer.

Bolland had failed to overhaul the group’s clothing division and boost sales volumes aside from a “slight uptick”​ during the first quarter of 2015 since he joined the retailer in 2010, Palmer claimed.

Mounting pressure

“Pressure is mounting for Bolland to come good on his promises and focus more on increasing margins through supply-chain savings and shift away from heavy discounting,” ​she added.

“Increased confidence following the election result and a boost in clothing sales from the hot summer should provide cause for optimism in the next quarter.”

Market analyst Shore Capital said M&S’s food department was “vibrant, theatrical and busy”​, but its ladies wear business was “conservative, elderly and quiet”.

“In food, we believe that M&S is in a very good place, with a high level of exclusivity alongside its strong innovation rates and demonstrably premium quality meaning that M&S food is well positioned for the challenges of the current UK market, where discounting remains a considerable challenge,” ​Shore Capital analysts Clive Black and Darren Shirley said.

Julie Palmer, Begbies Traynor

“Pressure is mounting for Bolland to come good on his promises​ ...

Will clothing ever match food?

“How many times has the question been asked; will M&S ever do in clothing what it does in food?

​That said the health and beauty, footwear and home wares were livelier and looked to be trading more robustly.” 

Food like-for-like sales were up 0.3% against a Shore Capital estimate of 1.0% and a positive like-for-like from the first quarter of 2015 of 1.7%.

This compared with a fourth quarter 2015 run-rate of 0.7%. Total sales increased by 3.2%, with new space contributing 2.9% against a Shore Capital forecast of about 3%.

Consensus expectation was for a 0.5% like-for-like increase, so Shore Capital said its expected the market would be comfortable with first quarter trading.

Marc Bolland, M&S chief executive, said:“We continue to make progress against our key priorities. Our food business did very well in a difficult market. In general merchandise, sales were broadly level on last year and we are on track to deliver the planned increase in gross margin.

“M&S.com performance was very strong, with customers appreciating all the improvements to our website.”

M&S results at a glance

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