M&S to post weak Christmas clothes sales

Bellwether retailer's figures to head a string of key high-street trading updates due this week
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The Independent Online

Retail giant Marks & Spencer is set to add to the high-street gloom on Tuesday by posting weak clothing sales over the Christmas period.

M&S's figures will give the clearest guidance yet of festive trading because it is the bellwether for the sector, with more than 700 UK stores and 21 million customers.

The City is forecasting that it will post general merchandise sales, covering fashion and homeware, down by 1.5 per cent over the 13 weeks to 31 December, reflecting a range of flat to a fall of 2.5 per cent. However, the 128-year-old retailer's food division is expected to have done better, posting growth of 1.5 per cent.

But the chain's expected lacklustre non-food sales come despite it – and all other retailers – being up against soft comparable sales in late 2010, when snow knocked between £50m and £55m off its general merchandise sales.

Indeed, Lord Wolfson, the chief executive of Next, last week described trading in the retailer's stores at the end of November and in the first three weeks of December in 2011 as "slightly disappointing", although it benefited from a late-rush in the week before Christmas Day.

However, the most widely held view of Christmas 2011 so far is that, while it was far from a vintage year, it was not as bad as many had predicted, after a late-rush of spending. And those chains that have enlisted the help of administrators recently, including the shoe group Barratts Priceless, the gift retailer Past Times, and the lingerie chain La Senza, have been on the watchlist of insolvency practitioners for months, if not years.

At the more buoyant end of the high street, John Lewis delivered a 6.2 per cent rise in underlying sales for the five weeks to 31 December. Even the loss-making chains Clinton Cards and JJB Sports delivered underlying sales growth – albeit against weak comparable figures.

Christine Cross, the chief retail adviser to PricewaterhouseCoopers, said: "Breathe a sigh of relief that there weren't more profit warnings last week. Those that have scraped into the black need to be congratulated. In truth, results last week have been very good, not disappointing. Any retailer with positive like-for-like sales and a double digit growth in online is doing well."

However, the true test of Christmas 2011 will come when retailers post their annual results, and the impact on profit margins of widespread discounting before Christmas is clearer.

This week sees most of the UK-listed retail sector update on Christmas trading, including Debenhams, Argos-owner Home Retail, Mothercare, Game and the big grocers.

Analysts at Deutsche Bank forecast a fall of 2 per cent in Tesco's UK underlying sales for the six weeks to 7 January, compared with a 0.9 per cent drop in its third and second quarters. Reflecting the subdued performance of the UK's biggest retailer, few, if any, retail chains are expecting that 2012 will be anything other than a hard slog.

Darcy Willson-Rymer, the chief executive of Clinton Cards, said: "In my retail life span, this is the toughest trading period we have experienced."

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