M&S lifted by signs of turnaround in clothing sales

 

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The Independent Online

Marks and Spencer’s beleaguered chief executive Marc Bolland was offered a brief respite yesterday as he managed to record an uptick in non-food sales for the first time in more than four years.

Investors were so impressed with the glimmer of hope for the high street retailer’s fortunes that they sent the share price to a seven-year high – making the company the most valuable it has ever been under Mr Bolland’s five year reign. Marks & Spencer shares closed up 4 per cent at 554p.

General merchandise sales grew in the three months to 28 March by 0.7 per cent on a like-for-like basis thanks mainly to a strong performance from its website. The site had suffered terribly earlier this year from warehouse problems and failing to win over customers with its £150m redesign.

Analysts were at pains to point out that yesterday was only a potential starting point for a turnaround and there was still a long way to go, although they were generally positive.

Some suggested more clothes had been sold in the January sales after the company avoided heavy discounting in the lead up to Christmas, while bosses said they were generally selling more garments at full price.

Mr Bolland said: “I’ve always said this is a step-by-step approach and this is certainly a step in the right direction. Customers are telling us they are noticing the difference in our product quality and style.”

The website was star performer, with sales up 13.8 per cent, accounting for 15 per cent of total non-food sales. Tony Shiret, a retail analyst at BESI, suggested this means in-store sales fell by around 2 per cent.

He added: “There is likely to be some debate about how the GM sales figure has been achieved in light of highly visible late-year promotional activity. But numbers going up is worth something to the share price and stands the company in good stead.”

Mr Bolland added that the shambles at the company’s  new warehouse over Christmas, which left customers frustrated and sales down 5.8 per cent, had now been fixed.

He said the buzz around the business from shoppers was also helping. A suede skirt modelled by Alexa Chung and Olivia Palermo, which costs about £200 and has not even gone on sale yet, has been so popular that there is already a waiting list and a dedicated page on its website.

Andrew Wade, the retail analyst at Numis, suggested that M&S had managed to stop the rot of losing market share to rivals and pointed out that the profit margins were still expected to jump by up to 200 basis points.

But he warned: “We are mindful that the fourth quarter last year, before the effects of the M&S.com relaunch and the poor weather which blighted the previous two quarters, also saw a 0.6 per cent clothing like-for-like rise which was not sustained.”

The food division also performed strongly, up 0.7 per cent, as M&S managed to avoid being dragged into the price war between its rivals.

It has been one of the only food retailers not to suffer a fall in sales, despite food price deflation, including its closest rival Waitrose, which saw sales fall last year by 10.5 per cent.

However, there was bad news for its international business, which suffered a 3.8 per cent fall.

It was particularly hard hit in Russia and Ukraine due to the political unrest and sanctions that have sent the rouble plummeting. The weak euro also hit its Turkish business and has led to some analysts downgrading full-year international sales.

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