Yahoo Finance Marks & Spencer to report slump in clothing sales after short-lived boost
Marks & Spencer will report a fresh slump in clothing sales on Wednesday after a revival at Christmas proved short-lived.
The disappointing finish to the year will be revealed alongside a sharp fall in annual profits. Hopes that M&S chief executive Steve Rowe had come up with a winning formula for the UK’s biggest clothing retailer were raised after it recorded its first underlying growth in nearly two years over the key festive quarter. But with rivals such as Next reporting moribund sales as rising living costs force Britons to tighten their belts, M&S’s clothing and homewares sales are expected to have tumbled more than 3% in the first three months of 2017. Its food business is also expected to post a small decline in underlying sales.
Investec analyst Kate Calvert has pencilled in pre-tax profits of £603m for the year to 31 March – down from £690m a year ago as the combination of rising costs and falling sales eats into the company’s profitability. “M&S is playing catch up in a difficult mid-market position,” said Calvert who said the collapse in the value of the pound since the Brexit vote would add to the pressures faced by management this year as the cost of imported goods rises.
Rowe, who began his retail career aged 15 as a Saturday boy at M&S’s Croydon store in south London and took over as chief executive in April 2016, is seeking to revive the declining profits of the 132-year-old retailer. His biggest job is turning around its clothing arm, which under predecessor Marc Bolland relied on heavy discounting to attract shoppers.
The M&S lifer initially concentrated on lowering clothing prices and running fewer promotions while promising female shoppers wearable rather than catwalk fashions. He upped the ante in the autumn, unveiling a five-year plan to slash the amount of trading space devoted to clothing by 10% and instead focus on the expansion of its upmarket food halls. Rowe also pulled the plug on 53 company-run stores in loss-making overseas markets including China, France, Belgium and Poland.
The shake-up of M&S’s UK chain involves the closure of 30 of its 304 “full-line” stores – which sell clothing, homeware and food – while another 45 are being converted into food-only shops. Last month it confirmed the first wave of closures would be in Portsmouth, Slough, Warrington and Wokingham. The Guardian also revealed plans to trial an online grocery shopping service this autumn.
Some analysts have argued that Rowe’s plans are not radical enough at a time when high street sales are transferring to the internet and nimbler rivals such as Zara and Primark are stealing its customers. Veteran retail analyst Tony Shiret said M&S was “still in denial” about the scale of the store closures required – pointing to Mothercare which last week said it would close up to 70 of its 152 UK stores as it adapts to a digital age. “There is no point opening new physical space,” he said.
The retailer’s turnaround plan is expected to evolve in the coming months following a series of high profile senior appointments. It has hired retail turnaround expert Archie Norman to succeed Robert Swannell, who is retiring as chairman after seven years in the role while Jill McDonald has been poached from car parts and bike retailer Halfords, to the new role of managing director of its clothing, home and beauty business.
