Marks & Spencer expected to report another drop in food sales

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Marks & Spencer is forecast to report further under performance in its food arm amid its annual figures next week, sparking concerns over the retailer’s health.

Analysts’ consensus estimates suggest food sales at the department store could have dropped by 0.2 per cent, while City analysts think they could have dropped as much as 1.1 per cent over the last year.

Underlying pre-tax profits are also set to drop six per cent to £573 million, but bottom line profits are expected to shoot up to £458 million from £176.4 million last year.

Should food sales decline again in the fourth quarter, its food arm will have seen an entire year of decline.

Chief executive Steve Rowe has previously referred to its grocery arm’s “ongoing under-performance”, as increasing price competition from discounters, large scale consolidation from the Big 4 and increasing import costs batter the sector.

This will be particularly concerning for M&S, which has relied on its food arm to drive revenue over the past two years while its clothing arm faces similar woes, set for a 1.1 per cent drop.

In a continued effort to overhaul its struggling clothing business, M&S unveiled a new leadership team in March, seeing its womenswear and kidswear teams merge.

It is also undergoing a five-year transformation plan, which has seen distribution centre and store closures across the UK, threatening hundreds of jobs.

“We have previously argued that focus on convenience/food-to-go and a premium own-label offer afforded M&S a defensible point of differentiation,” HSBC analyst Paul Rossington said.

“However, such has been the increase in price competition, and expected increase in competition on premium lines, that the M&S price premium now looks increasingly stretched.

“Self-inflicted execution mistakes have also undermined range and service.”

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2 COMMENTS

  1. Its under-performing because they under-invest in it. They put out the fancy adverts but you cant do a proper grocery shop at M&S. Where is the expansion they were talking about? Closing stores leads to resentment of the brand. If staff at head office cant be bothered to get a ticket to loss making stores to see why, and instead just looking at a spreadsheet in their London towers and close stores.

    I recently stopped shopping at M&S and refuse to go in. They don’t listen to what the customers want and they don’t give what customers want. Yet the CEO’s change and get big pay-cheques… but they still do a poor job and move on.

  2. I think the penny has dropped and once people have shopped in Primark and Aldi, then compare the prices with M&S, they never go back. You are talking 2x – 3x price differences. There is a realisation now that we have been living in la-la land, the ultimate representation of which is free coffee at Waitrose. You are paying higher prices so that someone else can drink coffee at your expense. It only needs 20% of people to shift their habits and the dinosaurs will fall because their fixed cost base is so enormous.

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