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Tough year end for M&S

Despite solid Christmas trading figures, market remains a challenge for premium food and clothing retailer

Tough year end for M&S

Steve Rowe

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Marks & Spencer suffered a disappointing end to 2018, but insisted its transformation plan remains on track.

The food and clothing giant reported a total UK sales decline of 2.2 per cent in the 13 weeks to 29 December 2018, with Food division sales falling 2.1 per cent to £1.7 billion and Clothing & Home dropping 2.4 per cent to £1.1bn. With a 15.1 per cent collapse in international sales, that left an overall group decline of 3.9 per cent at £3bn.

Chief executive Steve Rowe said the performance was steady against the backdrop of very difficult market conditions, adding that the Food business traded well over Christmas as customers “responded well to improved value”.

“The combination of reducing consumer confidence, mild weather, Black Friday and widespread discounting by our competitors made November a very challenging trading period,” he added. “However, overall our 13-week performance was steady with some early encouraging signs.”

Rowe said the retailer is making good progress in its plan to re-engineer its food range and value proposition, with the goal to transition to “trusted value” by lowering prices and removing “complex and confusing” multibuy promotions. “There are early signs of volume growth and we expect to see more momentum under a strong new management team as the year progresses.

“Customers responded well to our Christmas ranges and campaign resulting in solid volume growth over the Christmas period, with the majority of stores delivering like-for-like revenue growth”.

The fall in international revenue was due to the impact of the sale of its Hong Kong business and closure of stores in loss-making exit markets. 

Analysts suggested M&S will be disappointed with the results. Richard Lim, chief executive of Retail Economics, said: "These results are worse than expected. It's increasingly evident that Christmas is becoming an online event and these figures reaffirm the polarisation of shopping habits with online propping up the poor performance of their store sales. 

"This accelerating trend has benefitted the retailers that have the scale, capacity and seamless online operations to cope with the peak in demand over Christmas and M&S is struggling to keep up. 

"Put simply, the retailer is burdened with too many stores, unsuitable space and the spiralling operating costs associated with this outdated business model. As a higher proportion of sales move online, the cost of fulfilling these orders is rising too. Set against the backdrop of fragile consumer confidence, it's a difficult place to be."

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