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Jul 5, 2013
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Marks & Spencer clothing sales to fall again

By
Reuters
Published
Jul 5, 2013

LONDON, England - British retailer Marks & Spencer is set to report an eighth consecutive quarterly fall in clothing sales, ratcheting up pressure on management to deliver a swift turnaround when new season ranges start hitting the shops later this month.

Britain's biggest clothing retailer, which also sells homewares and upmarket foods, will publish first-quarter sales on Tuesday, the same day it hosts an annual shareholder meeting that could see Chief Executive Marc Bolland under fire from investors angered by two years of falling profit.

The 129-year-old group, which serves 21 million customers a week from 766 British stores, is forecast to report a drop in sales of general merchandise - clothing, footwear and homewares - of 0.2 percent to 3.0 percent at shops open over a year in the 13 weeks to June 29, according to a company poll of 10 analysts.

The average forecast for a fall of 1.5 percent compares with a 3.8 percent decline in the fourth quarter of the group's 2012-13 financial year.

Bolland, CEO since 2010, is spending 2.3 billion pounds ($3.5 billion) over three years on store revamps, logistics, IT and systems, as well as selective investment overseas, as he seeks to make Marks & Spencer (M&S) an international multi-channel retailer, connecting with customers through stores, the internet and mobile devices.

He is pinning his hopes on a new clothing strategy based on more stylish and higher-quality garments.

Autumn/winter ranges were unveiled in May by his new general merchandise team, receiving generally positive reviews from both analysts and the fashion press, and sending M&S shares, which have also been buoyed by periodic bouts of bid speculation, to a five-year high.

Sales data for the fiscal first quarter will be the last to fully reflect garments purchased by the previous buying team. It will also have been impacted by continued pressure on consumers' disposable incomes and poor weather.

Last week Debenhams, Britain's No. 2 department store group, missed forecasts for third-quarter sales, blaming a volatile trading climate and cold weather.

GOING TO WEMBLEY

Some investors, such as Standard Life, have said there could be pressure for management change if the new autumn ranges do not set the tills ringing.

They will want to see signs of a pick-up when M&S updates on second-quarter sales in November, while a much improved Christmas trading performance is imperative for Bolland.

M&S's food business, which contributes over half of group sales, is performing much better, with analysts forecasting first-quarter like-for-like sales up 1.0 percent to 2.0 percent - with a consensus of up 1.6 percent - after a rise of 4.0 percent in the previous quarter.

The slowdown in growth here reflects Easter falling in M&S's first quarter in 2012 but in its fourth quarter in 2013 making comparative numbers tougher.

The food business is benefiting from product innovation, a focus on providing for special occasions and M&S's avoidance of any involvement in a scandal over foods found to contain horsemeat when they were labelled as containing other meats.

Analysts are currently on average forecasting M&S will make a pretax profit for fiscal 2013-14 of 675 million pounds, only slightly up from the 665 million pounds made in 2012-13.

Bolland may also face criticism over his pay package at the shareholder meeting, being held at London's Wembley Stadium. Though in May M&S posted its lowest annual profit since 2009, he took home a bonus that rose 25 percent to 829,000 pounds.

But he will not be without some support. The Local Authority Pension Fund Forum (LAPFF), which was critical of M&S's management at the 2009 meeting, said it planned to back the board.

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