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.”