Oct 31, 2014
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Warm weather set to push M&S non-food sales down again

Oct 31, 2014

LONDON, United Kingdom - Marks & Spencer is set to report a 13th straight quarterly fall in underlying non-food sales, with trading hurt by Britain's warm autumnal weather, the continuing "settling in" of a new website and a sluggish economic recovery.

Marc Bolland, M&S CEO since 2010, has spent over 2.3 billion pounds to address decades of under-investment, overseeing the redesign of products and stores. But a new clothing team he set up in 2012 has so far failed to deliver a sustained increase in sales and, for the first time, M&S earned less in the year to the end of March than faster-growing rival Next.

Photo: AFP

The retailer publishes second-quarter sales figures on Wednesday and is expected to report a fall in sales of general merchandise - clothing, footwear and homewares - of 3.7 percent from shops open over a year, according to a consensus of analysts' forecasts provided by the company.

That compares with a first-quarter decline of 1.5 percent.

The 130-year-old firm - Britain's No.1 clothing retailer by sales - also reports first-half results which are expected to show a 3.7 percent fall in pretax profit to 252 million pounds ($403 million), down for a fourth straight year.

M&S is expected to say the results for the 13 weeks to Sept. 27, its fiscal second quarter, reflected Britain's mild autumn - not helpful for shifting high-margin winter coats, knitwear and boots.

Official data published on Oct. 23 also showed British retail sales fell more than expected in September, the most important month in M&S's second quarter. The data added to signs the country's economic recovery is losing some of its pace.

On Wednesday the warm weather forced Britain's No.2 clothing retailer Next to cut its full-year profit guidance, as it forecasted slowing sales of winter wares would continue into its final Christmas quarter, with fashion firm SuperGroup following suit on Friday.


M&S management has also indicated that online sales were likely to remain under pressure in the second quarter, after a fall in the previous quarter.

The new M&S.com, launched in February, is a pillar of the firm's planned transformation into an international retailer reaching customers through stores, the web and mobile devices. The relaunch brought more video and magazine-style content, but some shoppers found it hard to register on the site.

M&S Touch Screen Order Point

In May the company warned the site would take up to six months to "settle in".

M&S has said its trading strategy is to focus on gross margin, rather than chase unprofitable sales. It has guided to a full-year increase in non-food gross margin of 100 basis points.

M&S's food business - which contributes over half of group sales and about a third of profit - is performing better than clothing, with analysts on average forecasting second-quarter like-for-like sales up 0.2 percent.

That would compare with first-quarter growth of 1.7 percent, or 0.1 percent adjusting for the impact of a later Easter.

The food business is outperforming a grocery industry growing at its slowest pace for 20 years, benefiting from product innovation and a focus on providing for special occasions.

M&S has guided to a full-year rise in food gross margins of 10 to 30 basis points.

Shares in M&S, down 19 percent over the last year, were up 0.4 percent at 406.6 pence on Friday at 0952 am London time, valuing the business at 6.6 billion pounds.

1 US dollar = 0.6256 British pound

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