The chairman of Marks & Spencer, Luc Vandevelde, admitted yesterday that the retailer had missed internal targets during its first half as he was forced on to the defensive over City fears that the group's recovery had stalled.
Mr Vandevelde, reporting a 7 per cent rise in interim pre-tax profits, insisted that the group was "not running out of steam" despite its recent failure to take market share from its high-street clothing rivals. "Holding market share in the first half has been slightly less than what we were aspiring to," he said. "We know we could do more."
Analysts were unimpressed, and shares in the company slipped 2.25p to 285p. "They have lost some momentum in clothing. It does give you cause for concern about moving the sales line back up," one said. An unexpected knitwear promotion and recent slower sales growth have sparked worries that customers are deserting M&S once more.
Mr Vandevelde said the group felt it was "well beyond the recovery phase", although its share of the clothing market remains two percentage points below its historical peak of 13 per cent. Roger Holmes, the chief executive, said: "We retain an aspiration to grow market share [but] the world is a different place." Women's tailoring and childrenswear remained weak, although its back-to-school ranges meant children's clothing was showing signs of stabilising, he added.
M&S reported underlying pre-tax profits of £311.5m for the six months to 27 September. After exceptional items, including profit on the sale of a London site, pre-tax profits rose 14.3 per cent to £326m. UK retail sales rose by 20 per cent to £287m, boosted by stronger margins after expanding the number of products sourced from cheaper overseas markets.
Mr Holmes said future sourcing gains would be re-invested in selling more high quality products, such as its "with cashmere" jumpers, rather than lower prices. This was in spite of revealing that customers were starting to question whether M&S provided good value.
The group said it would pump more money into promoting its food offering. It still plans to have 150 food stores trading by March 2006.
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