UK Markets closed

M&S To Reveal Christmas Clothing Sales Slump

(c) Sky News 2013

Marks & Spencer (Other OTC: MAKSY - news) experienced a worse-than-expected slump in pre-Christmas clothing sales, the company will announce on Thursday, underlining the scale of the recovery confronting Britain's best-known retailer.

I have learned that M&S's general merchandise sales in the 13 weeks to December 29 fell by approximately 3.7% on a like-for-like basis, against the same period last year, a measurement which strips out the effects of changes to selling space.

City sources said that M&S's food sales had fared better during the period, recording a like-for-like increase in the region of 0.3%.

The poor performance in clothing, however, which contrasts with that of Next (Other OTC: NXGPF - news) and some other high street rivals during the crucial Christmas trading period, dragged M&S to an overall fall in like-for-like sales of just under 2%, according to these sources.

Marc Bolland, the M&S chief executive, will announce the numbers tomorrow morning in a trading statement covering the third quarter of M&S's financial year.

The news will place M&S firmly in the losers' camp of big UK retailers at a time when achieving significant sales increases without discounting has been rendered tougher by difficult economic conditions.

Today, J Sainsbury reported a 0.9% increase in third-quarter like-for-like sales, its 32nd consecutive quarter of growth. That followed Wm Morrison's disappointing figures earlier this week. Along with M&S, Tesco (Other OTC: TSCDY - news) reports on its Christmas trading performance tomorrow.

City analysts' forecasts for performance in M&S's like-for-like general merchandise sales ranged from an increase of 0.5% to a decline of 3.5%, with a consensus among 11 analysts of a 1.5% fall.

The fact that the true picture is uglier than even the worst City expectations will heap pressure on Mr Bolland, who took over as chief executive in 2010.

M&S's former head of clothing, Kate Bostock, left to join the internet retailer Asos (Other OTC: ASOMY - news) last year after months of speculation linking her with a move. Her successor, style director Belinda Earl, a former boss of Debenhams (Other OTC: DBHSY - news) , has only recently joined and Mr Bolland has warned that the effects of her influence will not be felt until the autumn.

In food, forecasts ranged from a fall of 0.8% in like-for-like sales to a 1.5% increase, with a consensus of a 0.5% rise.

Shares in M&S have slipped almost 10% in the last month amid growing concern in the market about the group’s likely Christmas trading performance.

While like-for-like figures are one measure of retailers’ performance, they ignore the impact on profitability of price reductions designed to drive higher sales volumes.

Some rivals, including Debenhams, which reported a record festive sales performance earlier this week, discounted heavily before Christmas in order to lure shoppers.

Analysts at Nomura, which predicted a fall of 1.4% in overall like-for-like sales, said last week that it expected December sales "to struggle against tough prior-year promotion-driven comparatives to make positive ground, despite some reports of strong retail sales in the week before Christmas".

M&S refused to comment.