8th Apr 11
Retailers boosted by Marks & Spencer sales rise
by Natasha Redman
Bright trading: M&S results boost high street hopes
Bright trading: M&S results boost high street hopes
The despondent UK retail sector was provided with a much-needed boost yesterday when the country’s largest clothing retailer, Marks & Spencer, issues surprise positive sales figures for the three months leading up to April.
M&S stated that total sales in the UK went up by one per cent over the most recent quarter. Before the results were released, a team of 15 City analysts predicted that sales would have dropped by 2.5 per cent over the quarter.
The chief executive of M&S, Marc Bolland, said that the chain increased market share in clothing and food in a high street environment which was challenging as consumers were purchasing “affordable treats” from stores as a way of respite from thinking about tightened household budgets. He went on to say that consumer confidence may be low, but it is also stable.
In recent weeks, UK retailers have endured terrible trading as consumers have put a stop to their spending as a result of rising taxes and commodity prices, as well as concerns about public sector job cuts. Last week, nearly £2bn was wiped from the general retail sector’s value after profit warnings from companies like Dixons Retail.
On Wednesday, M&S shares climbed six per cent to 360.6p due to the announcement of the sales figures. Over the 13 weeks leading up to April 2, M&S’s like-for-like food sales increased by 3.4 per cent and like-for-like clothing sales dropped by 3.9 per cent, less of a fall than had been forecasted.
Despite of the good performance by M&S, Mr Bolland said that he expects trading conditions over the next year to be increasingly difficult due to high commodity prices and pressure on household incomes. M&S’s clothing prices have already risen by roughly six per cent on the previous year.
Mr Bolland said that the operating costs of the company will increase by about five per cent due to inflation, increased depreciation and space growth. He also informed that gross margins at the company will be from 0 to 25 basis points more than they currently are.
Analysts have said that the recent sales performance by M&S was very good, particularly in the current climate. Singer Capital Markets’ analyst Matthew McEachran said that M&S performed better than expected in a tough backdrop. Broker Seymour Price said that Mr Bolland had brought a new resilience to the retailer after joining a year ago.
Charles Stanley analysts described the outcome of like-for-like clothing sales as creditable, given the extremely tough comparative of 9.1 per cent last year as well as the challenging consumer environment. But the brokerage did warn that the coming year-and-a-half will present a consumer environment which is very tough.
M&S said that certain product lines had been dramatically boosted as a result of its latest TV advertisement campaign. There was a rise of 76 per cent with the “killer” kitten heels since the adverts began airing; water-repellent Stormwear clothing sales increased by 27 per cent, while Champagne sales also climbed eight per cent compared with last year.
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