Marks and Spencer: Festive disaster as non-food sales fall for the 14th straight quarter

The high-street giant admitted that its peak December trade was hit by its £200m, state-of-the-art distribution centre failing to cope with demand

Members of the public walk past a branch of Marks & Spencer on January 7, 2014 in London, England (Oli Scarff | Getty Images)

Marks & Spencer suffered a disastrous Christmas across its clothing and gifts business after a warehouse meltdown and warm weather sent sales in the division plummeting for the 14th quarter in a row.

The high-street giant admitted that its peak December trade was hit by its £200m, state-of-the-art distribution centre in Castle Donington, in the East Midlands, failing to cope with demand.

M&S’s chief executive, Marc Bolland, described the 5.8 per cent decline in non-food sales as “clearly disappointing” but added that the problems have now been put right at the warehouse. He said: “I certainly hold up my hands, and I feel that where we’ve gone wrong it is disappointing and we need to put it right.

“It’s a very advanced automated site. The disruption started with Black Friday and there was a sustained volume peak after that. At its heart [the distribution centre] does two things – picking and packing.

“On the picking side we are not getting the flow we needed, and on the packing side we did not have the flexibility to manage the complexity of Christmas. On the automation settings, we need to get the picking better. It has certainly hampered our sales over the quarter.”

Mr Bolland added that before the December peak, the company suffered from the warm autumn and winter weather to a greater extent than its rivals, due to M&S being the biggest seller of coats and knitwear seller on the high street.

Expected profit levels remained unchanged and previous policies of pre-Christmas huge day sales were scrapped, helping the company to maintain profit margins higher than last year. However, despite Mr Bolland’s attempts to allay fears, investors and analysts reacted with shock over the poor performance, sending the shares down 16.3p to 446.9p.

Chris White, the head of UK equities at M&S shareholder Premier Asset Management, said: “All the hard work in general merchandise came to nought over the festive period as customers voted with their feet and found better value for money elsewhere.”

Nicla Di Palma, a retail analyst at Brewin Dolphin, added: “Overall, we find this statement really disappointing. M&S has invested in new designers and has been trying to improve the appeal of its womenswear collections for a few years now, but not successfully so far.”

The M&S website has been beset by problems for most of the past year in the wake of a £150m overhaul, with customers being forced to re-register with the new website after the old site, hosted by Amazon, would not move over shoppers’ details.

Sales online dropped and the company admitted that too many shoppers were not completing purchases.

However, there was better news for M&S’s food division as sales rose slightly by 0.1 per cent – ahead of the big supermarkets, which have so far suffered Christmas falls – although this was below expectations.

In the week of Christmas, food sales soared 17 per cent, helped by the retailer shifting 9 million turkeys.