Marks & Spencer posted better-than-expected fourth-quarter sales figures yesterday, but warned that retailers face a tough year unless the new government acts to reduce waste and limit the tax burden on consumers.
The group, which had a recessionravaged 2009, beat analyst expectations to record a 5.1 per cent sales increase in the 13 weeks to 27 March. Experts had predicted more anaemic growth of 1.7 per cent from the clothing, food and homeware retailer.
Sir Stuart Rose, M&S's executive chairman, pointed to strong sales in the group's formalwear and knitwear divisions for the upbeat numbers. The finance director Ian Dyson said that full-year profits would be between £620m and £630m, taking into account £80m which has been set aside for staff bonuses. M&S will report its full-year results on 25 May.
"These are strong quarterly results by any measure," said Sir Stuart. "They demonstrate the appeal of the M&S brand to our 21 million weekly customers and its resilience in these difficult times."
Like-for-like clothes sales jumped by 9.1 per cent, while the company said that its UK market share was up by more than 1 percentage point to 11.9 per cent. Food sales rose by 1.8 per cent, the sixth consecutive quarter of growth, despite a dramatic improvement in the fortunes of Waitrose, M&S's major competitor in the up-market food sector. Online sales soared by 48 per cent.
Despite the strong trading figures, elements of Marks & Spencer's overseas business suffered. The group has sizeable operations in both Greece and Ireland, which have both been knocked severely by the recession. Overall, international sales fell by 5.9 per cent in the fourth quarter.
"The update provides some headline reassurance – sales have exceeded estimates by some margin, with improving trends seen across the group's core UK business," Keith Bowman, an analyst at Hargreaves Lansdown, said.
"Nonetheless, the update leaves management little room for complacency. Timing and the weather both look to have played their part, whilst the group's international expansion strategy looks far from assured. Furthermore, group costs have been rising, while doubt still persists in relation to the market positioning of the group's food business."
These challenges will face incoming chief executive Marc Bolland, who is due to join M&S on 1 May. Mr Bolland is credited with turning around the grocery group Wm Morrison. He is expected to launch a review of M&S's businesses when he takes the helm.
Sir Stuart will become non-executive chairman after leading the company for the last six years. Recently he has become a cheerleader for the Conservative Party's economic policies. Last week, he was a signatory to a business leaders' letter to the press, which backed the Tories' policy of not increasing national insurance contributions. The Prime Minister said that Sir Stuart, and the other company bosses that signed the letter, had been deceived.
"One of the things that was in the letter that I signed, and many other people signed, is that there is a huge opportunity to reduce waste in government," Sir Stuart said yesterday.
"We hope that after the election there will be greater clarity on economic policy and how this will impact our customers individually. With this will come improving consumer confidence, which is so important for our business and the economy as a whole."
Marc Bolland: 5 tests facing the CEO
Food Yesterday's figures detailed the sixth consecutive quarter of growth in food sales, but a resurgent Waitrose is likely to challenge M&S in the upmarket food sector. Weak consumer confidence could see shoppers switch to lower-cost alternatives.
International operations M&S has a stated policy of growing international revenue to as much as 20 per cent of the group's total by 2012 but, so far, the strategy has not been a roaring success.
Younger customers M&S is still fantastically popular with the over-40s, but struggles to attract younger shoppers.
Stretching the brand Will Mr Bolland opt to take M&S into new markets, following Tesco, which has moved in areas such as telecoms?
The Sainbury's question It has long been rumoured, but will Mr Bolland launch merger talks with the supermarket giant?Reuse content