Britain's M&S beats forecasts with clothing growth

Source : REUTERS
Last Updated: Thu, Jan 12, 2017 16:45 hrs
The logo of Marks

By Paul Sandle

LONDON (Reuters) - Marks & Spencer(M&S) soundly beat forecasts for Christmas trading with its first quarterly rise in clothing and homeware sales in nearly two years, delivering a welcome boost for new boss Steve Rowe.

After taking the helm in April, Rowe instigated the latest in a long line of M&S recovery strategies, focusing on turning around the underperforming clothing and homewares business, and was rewarded on Thursday with an unexpected 2.3 percent jump in the division's like-for-like sales in the 13 weeks to Dec. 31.

That beat market expectations of a slender rise of up to 0.2 percent, while food sales also beat forecasts. Food was up 0.6 percent, against predictions of a slight fall.

Chief Executive Rowe said that M&S had a "good" Christmas and that customers looking for clothes had responded to its "better ranges, better availability and better prices".

"We saw full-price increases in every single clothing division," Rowe said, adding that it was the first time the 133-year-old company had gained market share in the full-price clothing market for about seven years.

The food operation, meanwhile, benefited from customers' preference for premium products at Christmas, Rowe said.

"(That) played to our strengths as we continued to focus on special and different products, growing our business in a tough market," he added.

M&S shares rose by as much as 6 percent to a six-month high after Thursday's update and were still up by nearly 2 percent at close to 347 pence at 0954 GMT.

Shore Capital analyst Clive Black acknowledged the "very welcome" improvement in clothing sales, but added: "This early win needs to become a trend for the stock to fulfil its undoubted potential."

QUALITY AND PRICING

Rowe's strategy focuses on simplifying product ranges, improving quality and pricing, with fewer discounted products.

"We have been listening to customers very carefully, making sure our merchandise is appropriate, getting those wardrobe essentials right (...) and it's worked," he told reporters on Thursday.

He said that children's clothes, cashmere and lambswool jumpers and lingerie -- traditional M&S strengths -- sold well.

A buoyant Christmas for M&S was in contrast with a miserable season at Next, its closest rival in clothes and homeware.

Next, which has outperformed M&S for more than a decade, said on Jan. 4 that full-price sales in stores fell by 3.5 percent in the run-up to Christmas. [nL5N1EU0T6]

M&S said that customers traded up in festive food, treating themselves to more than 100,00 of its chocolate pine cones in the last days before Christmas, while sales of premium turkeys jumped by 11 percent.

Its numbers were helped by the timing of the period, with an additional five days of the busy post-Christmas sale falling into the quarter.

It estimated that timing had a positive effect of about 1.5 percent on clothing and homeware sales and about 0.3 percent on food.

Rowe remained cautious on the retailer's outlook, saying that fourth-quarter numbers would be adversely hit by the timing that helped the third quarter, as well as a later Easter, but the company's full-year guidance remained unchanged.

Analysts expect M&S to report full-year pretax profit of 593 million pounds ($726 million) for the year to March 31, down from 690 million pounds in 2015-16.

($1 = 0.8163 pounds)

(Editing by David Goodman)



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