Marks and Spencers still has much to do after like-for-like sales drop 1.5%
City Index July 8, 2014 12:23 PM
<p>Marks and Spencers, the UK retailer, announced today that first quarter like-for-like sales for the group had dropped by 1.5%, whilst UK like-for-like (lfl) sales […]</p>
Marks and Spencers, the UK retailer, announced today that first quarter like-for-like sales for the group had dropped by 1.5%, whilst UK like-for-like (lfl) sales had risen by 0.3%.
The retailer maintained its full-year guidance, although it recognises some improvement in consumer confidence even though market conditions remain challenging.
The result means that the retailer has now experienced a further decline in sales performance following a 0.6% drop in the previous quarter. The 1.5% decline does, however, come in slightly better than the general market consensus for a drop of around 1.7% in merchandise sales.
This is now the twelfth straight quarterly sales decline in non-food items including fashion and home.
Total food sales – which the CEO, Marc Bolland, claims outperforms the market – rose 4.2% whilst lfl sales rose 1.7% against expectations of a 2% rise. However, when you adjust sales for the impact of a late Easter, lfl sales actually rose 0.1%.
Like-for-like sales of clothing fell 0.6% against expectations of a 1.5% decline. The retailer said they were continuing to see improvement in the clothing division, with footfall and sales returning thanks to the improvements its made in quality and style.
One of the city’s concerns has been over margin. As the firm reacts to counter falling sales, will its increase in promotional activity impact overall profit margins? Marks and Spencer’s claims that this has been a key focus of their strategy, which has caused them to be less promotional in both online and store sales to help protect margins.
General merchandise sales were impacted by the ‘settling in’ of a new .com website, with online sales falling 8.1%. The business is now focused on optimising the website commercially.
Could have been worse but still much to do
It remains to be seen whether the website impact is becoming a fundamental concern on sales or whether this is really just teething issues with its roll out, which the firm maintains will last approximately six months (having been rolled out in February). The fact that online sales fell 8.1% during the teething issues remains a concern.
A £150m investment has been made into this brand new website and whilst one would expect some minor issues, you have to question the firm’s online due diligence for there to be such an impact on sales. This part requires careful watching over the coming quarters.
There remain significant concerns over Marc Bolland’s leadership, which has suffered similar resignations of its top executives that fellow suffering retailer Tesco has seen of late.
The improvement in market confidence is encouraging and this result is nowhere near as bad as the market had feared. Nevertheless, it’s equally nothing to cheer either.
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