Oct 30, 2013
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M&S to ask for more time as clothing sales keep falling

Oct 30, 2013

LONDON, England - Marks & Spencer is set to report a ninth straight quarterly fall in underlying clothing sales, with the firm likely to say it is too soon to see the full impact of a new general merchandise team and much vaunted new season ranges.

Britain's biggest clothing retailer, which also sells homewares and food, publishes second-quarter sales on Tuesday and also reports first-half results expected to show a 12 percent fall in pretax profit - down for the third year running.

"We will be pleased and relieved if we can retain our full-year forecasts intact," said Shore Capital analyst Clive Black.

The 129-year-old group, which serves 21 million customers a week from nearly 770 British stores, is forecast to report a fall in sales of general merchandise - clothing, footwear and homewares - of 0.4 percent to 2.5 percent from shops open over a year in the 13 weeks to September 28, its fiscal second quarter, according to a company poll of 13 analysts.

The average forecast for a drop of 1.5 percent is little changed from a first-quarter decline of 1.6 percent.

Though the autumn/winter ranges - the first from a clothing team led by John Dixon, the former boss of M&S food - hit M&S shops on July 25, the full launch, together with a high-profile advertising push featuring some of Britain's biggest female celebrities, did not kick off until September.

M&S is expected to say the second-quarter outcome will reflect the impact of continued pressure on consumers' disposable incomes, a highly promotional trading environment, as well as a sustained and mild autumn in the UK - not helpful for shifting high-margin winter coats, jumpers and boots.

The firm will, however, take comfort from the latest market share data from Kantar Worldpanel, leaked to Retail Week, showing it held its overall share of the British clothing market in the 24 weeks to end-September

The data showed M&S is still falling behind in womenswear, though the decline of 0.2 percentage points was an improvement on a 0.5 percentage point contraction in the prior period.

Marc Bolland, chief executive since 2010, has denied the autumn/winter ranges represent a make-or-break moment for his stewardship of the firm, whose shares have risen 23 percent over the last year on recovery hopes, stressing that directionally it is on the right track now that decades of under-investment are being addressed.

However, M&S insiders accept that a much improved trading performance over the key Christmas (third) quarter is imperative for Bolland to retain the support of investors, especially as comparative numbers in 2012 were weak.

The Dutch national is in the final year of a three-year, 2.3 billion pounds ($3.5 billion), plan to make M&S an international retailer connecting with customers through stores, the Internet and mobile devices.

M&S's food business, which contributes over half of group sales and about a third of profit, is performing much better, with analysts forecasting second-quarter like-for-like sales up 3.0 to 3.2 percent - with a consensus of up 3.0 percent - after a rise of 1.8 percent in the previous quarter.

The food business is benefiting from product innovation, a focus on providing for special occasions and M&S's avoidance of any involvement in a scandal over foods found to contain horsemeat when they were labeled as containing other meats.

Last week M&S said it would step-up expansion of its Simply Food convenience store network.

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