M&S soothes City fears with rise in womenswear sales

Marks & Spencer brushed aside growing fears of a consumer slowdown yesterday by surprising the City with sharply higher sales figures.

In a trading update for the three months to 28 September, the retailer revealed that sales growth had accelerated despite the recent spell of warm weather that has hit trading at its high street rivals.

The news provided further evidence that the recovery at the former lion of British retailing was on track, sending its shares 5 per cent higher to 328.75p. It also prompted a 2 per cent gain at Next, which last week unnerved the sector by reporting a shock fall in underlying sales.

M&S said total like-for-like sales had increased by 10 per cent during the second quarter – more than double the forecasts. This included a 13 per cent gain in like-for-like clothing sales, where womenswear remained a key driver.

Roger Holmes, who recently stepped up to chief executive from managing director, said that while the group was very pleased with its progress, it "was achieved against very weak comparatives with the benefit of a buoyant retail environment". In line with guidance given since the start of the year, the group said it expected sales growth to moderate to between 3 and 5 per cent going forward.

Mr Holmes said M&S's "segmentation approach" to clothing, which has seen it introduce sub-brands such as Per Una for woman and Blue Harbour for men, was behind the group's refound appeal. Other new areas have included Plus, for larger sizes, and the Viewfrom sportswear range. Analysts said the figures showed M&S was poised to build on the turnaround that has seen it claw back market share. Recent industry data to the end of August revealed that M&S had increased its share of the womenswear market to 14 per cent from 12 per cent. Overall, its share of the clothing market rose to 11 per cent from 10 per cent.

Mr Holmes said sales had continued to grow during September, which was the mildest start to autumn since 1991. But he conceded that the weather affected the mix of clothing with rugby shirts and suedette and denim skirts outselling jumpers and boots. He said a major knitwear launch, together with a faux fur range and eveningwear for Christmas, would be the key drivers to tempt shoppers this winter.

M&S said it had delivered its planned improvement in first-half clothing gross margin through better buying, although higher-than-budgeted markdown costs had weighed on the overall margin. Mr Holmes said the group's aggressive summer sales had reflected "a need to capture the sales momentum" that has built up. He conceded the retailer was still losing market share in sales of childrenswear but added the recent launch of the David Beckham-inspired range for boys was looking promising.

The group also outshone its supermarket rivals, with a 6 per cent rise in like-for-like food sales for the three months to end-September. This was buoyed by continued product innovation, Mr Holmes said.

David Jeary, an analyst at Credit Suisse First Boston, said: "&S sprung a genuine pleasant surprise on the market. It can't be faulted today."