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M&S sales up 0.5% in ‘challenging environment’

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Variety high street retailer Marks & Spencer (M&S) has today posted robust sales results for the final quarter of 2011, despite general merchandise goods seeing a slump in trading.

Overall group sales rose 2.4 per cent in the 13 weeks to December 31st 2011, helped by a strong international and online performance, but UK like-for-like (LFL) sales grew by just 0.5 per cent year-on-year in the period.

Food continued to be a strong segment in the UK for M&S, with sales up three per cent LFL, however LFL trading in general merchandise, which includes clothes and homewares, fell 1.8 per cent during the quarter.

CEO at M&S Marc Bolland argued that the retailer had “performed well in a challenging trading environment”, though given the high level of discounting seen on the British high street this Christmas and today’s statement missing any detail on profitability, it is likely that margins have been squeezed at the expense of securing sales growth.

For its full-year M&S’ profit predictions remain unchanged, with lower gross margins due to general merchandise promotions being offset by additional cost savings.

Home department sales saw the most dramatic reduction of any product category in Q4, with trading down 13.3 per cent, reflecting both the company’s decision to exit from technology goods and the difficulties seen more widely in this sector at present.

Neil Saunders, Managing Director of retail analysts Conlumino, argues that off the back a strong Christmas period last year these results are fairly positive for the trader but improvements will need to be made over the next year.

“These results demonstrate that while M&S is far from being in the premiership in growth terms, it can still play a reasonably good game,” Saunders said.

“That said, with a tough outlook for 2012 it needs to work much harder on its general merchandise offer if it is to further extend its share without resort to discounting.”

International sales growth came primarily from its key foreign markets of India and Shanghai as well as its franchise operations, while online trading, up 22.4 per cent year-on-year, was boosted by its new Christmas Food to Order service which contributed to a 12 per cent increase in orders.

Bolland added: “Our food business performed very strongly as customers enjoyed our new and traditional Christmas products. This unique offer, coupled with our great deals, gave them more choice than ever before for a special Christmas at home.

“In clothing our focus was on offering our customers real value at a time when they’re managing their budgets carefully. Our trading strategy worked well, delivering a record performance in many categories including menswear and sleepwear.”

Published on Tuesday 10 January by Editorial Assistant

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