M&S Still Sees Profit Pressure Despite Sales Gains
07 Avril 2016 - 11:00AM
Dow Jones News
LONDON—British retailer Marks & Spencer Group PLC reported a
1.9% rise in sales for the fiscal fourth quarter as food sales
helped outweigh a continuing slump in its clothing and home
division.
The sales update is a first under new Chief Executive Steve
Rowe, who took the reins on Saturday, and is facing the uphill task
of turning around M&S's clothing and home sales, which have
struggled for a string of quarters, while continuing to grow its
food arm.
M&S warned that it continues to expect currency pressures
and challenging trading conditions to heavily impact its full year
profitability.
On Thursday M&S reported a 4% rise in food sales for the 13
weeks ended March 26, although sales were flat on a comparable
basis as the company said it chose to improve its margins in this
business. Sales fell 1.9% in the clothing and home business while
comparable sales were down by 2.7%.
"Turning around our clothing and home business by improving our
customer offer is our number one priority," said Mr. Rowe, an
M&S lifer who started out doing small jobs for the company in
1983 at the age of 15.
The results underscore the pressure on Mr. Rowe to set out a
clear strategy at M&S's full-year earnings update next month on
how he plans to revive non-food sales.
"The outcome of his plans will ultimately determine the success
or otherwise of M&S' share price performance for the immediate
future," said Shore Capital analyst Clive Black of Mr. Rowe.
Mr. Rowe, who will continue to head up M&S's clothing and
home arm, has in the months before becoming CEO moved to improve
range, pricing and availability in the division while making senior
management changes. On Thursday he acknowledged the moves hadn't
gone far enough saying that "although the sales decline in clothing
and home was lower than last quarter, our performance remains
unsatisfactory and there is still more we need to do."
He said M&S has ratcheted down promotional activity, instead
cutting prices in a more sustainable fashion. The price of black
women's jeggings—leggings that resemble jeans—for instance, has
dropped from £ 19.50 ($27.46) to £ 17.50, which more than doubled
units sold from a year earlier, while white men's T-shirts fell
from £ 7.50 to £ 6, leading to a unit sales rise of 46%.
The London-based retailer said it now expects the full year
clothing and home gross margin to be between 240 to 250 basis
points, narrowing its previous guidance for the top end of 200 to
250 basis points.
Peel Hunt analyst Jonathan Pritchard said he is looking to Mr.
Rowe "to hopefully usher in a new strategy" during the company's
full-year earnings report next month, describing the M&S
results between 2010 and 2015 as "profoundly disappointing."
Analysts have suggested Mr. Rowe should look to sell
underperforming stores, improve staff engagement, clean up its
clothing and home brands and improve product quality in the
division.
"Short-term pain is required if M&S is to return to past
earnings levels in a sustainable manner," said Mr. Pritchard.
International sales on a constant currency basis grew by 3.8% in
the period, while in the U.K. sales grew by 1.6% and like-for-like
sales fell by 1.1%.
Olga Cotaga contributed to this article.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
April 07, 2016 04:45 ET (08:45 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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