Marks & Spencer posts surprise overall growth

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The Independent Online

Retail giant Marks & Spencer today posted a slowdown in sales in the first three months of the year but surprised the City with unexpected overall growth.

The retailer said big-impact promotions saw growth in food sales offset a decline in general merchandise, such as clothing, as UK like-for-like sales in the 13 weeks to April 2 grew at a better-than-expected 0.1%.

The results come amid a poor run for UK retailers - after HMV, Next and Currys owner Dixons Retail all reported difficult trading in the period since Christmas.

Shares were up 5% after the company published its trading update.

A decline in total like-for-like sales of 2.5% was forecast by analysts, with a particularly severe drop of 6.2% predicted for general merchandise.

But M&S has continued its bullish run, with like-for-like sales consistently beating expectations earlier in the financial year.

The retailer said the slowdown in sales in the fourth quarter, compared to 2.8% like-for-like growth in the third quarter, was partly down to tough comparatives a year ago.

While general merchandise sales dropped 3.4% on a same-store basis in the fourth quarter, the retailer said this was partly down to tough annual comparatives and it still managed to grow its market share by 0.3% to 11.6%.

In food, like-for-like sales were up 3.4% and market share was up 0.1% to 3.8%, driven by the chain's promotions, such as the Dine In offer, which proved popular on Valentine's Day and Mother's Day.

Chief executive Marc Bolland said: "In times like these, customers are increasingly turning to M&S for value, quality and innovation. Strong products backed by great advertising meant we outperformed the market and grew share in both food and clothing."

Mr Bolland, who took up the top post last May, said the retailer's most recent celebrity-laden advertising campaign, launched two weeks ago, has proved a success.

The seasonal items promoted in adverts featuring X Factor judge Dannii Minogue and singer V V Brown are up 5%, Mr Bolland said.

Elsewhere, water-repellent menswear promoted by footballer Jamie Redknapp is up 27% and the pain-alleviating high-heeled shoes backed by TV presenter Lisa Snowdon are up 70%.

"This advertising campaign is having a bigger impact than the adverts launched last year," Mr Bolland said.

"We have seen positive sales of the garments that feature in the new adverts."

M&S plans to increase its marketing spend next year, Mr Bolland said, so further celebrity-backed campaigns are in the offing.

Mr Bolland said the company was cautious due to increasing commodity prices and pressure on consumers' incomes.

But he said the conditions on the high street are not as severe as recent reports suggested.

He said: "We're not upbeat, but we are realistic. We've seen an environment which is difficult. We're not hitting a wall or falling off a cliff."

Mr Bolland said his vision for the business, laid out in November, was building momentum.

His latest move was to reveal plans for the chain to return to France - a decade after it pulled out of the country.

Freddie George, retail analyst at Seymour Pierce Research, said he suspects there has been a significant variation in sales trends over the period.

He said: "January was helped by easier comparatives as last year it was impacted by the weather, February benefited from a stronger Valentine's offer but March, we believe, has seen a marked step down in volumes."

M&S is expected to report pre-tax profits of £709 million, a 12% rise compared to the previous year, in its full-year results on May 24.

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