Disappointing General Merchandise sales Q3 M&S

Announcing its financial update for the third quarter of 2015/16 ending December 26, 2015, the Marks and Spencer Group (M&S) said that its general merchandise continued to decline. The company said that sales were down 5percent and like for like sales declined 5.8 percent due to unseasonal conditions and availability. However, M&S.com sales increased 20.9 percent. After releasing the trading statement for the period under review, the company’s CEO, Marc Bolland expressed his desire to step down from the role.

“M&S had an excellent Christmas in Food, delivering record Christmas sales and strongly outperforming the market. General Merchandise sales were disappointing. We continued to prioritise gross margin and held back from the heavy discounting seen across the market in the run up to Christmas. As a result we now expect GM gross margin to be at the top end of the guided range,” said Bolland.

Challenging Q3 for General Merchandise

In General Merchandise, the company said that unseasonal weather impacted sales across the clothing sector and resulted in unprecedented levels of promotional activity in the market, starting from Black Friday and intensifying through December. Against this backdrop, M&S held back from the heavy discounting seen across the market especially in the run up to Christmas. While this had an adverse impact on sales, the company said by doing so, it was able to protect gross margin, which it now expects to come in at the top end of the guided range.

M&S.com delivered a strong performance with continued improvement in traffic and customer experience. The company launched a new loyalty members club, Sparks, with over 3.3m customers joining since the launch 11 weeks ago. International business continued to face a challenging macro-economic environment, particularly across the Middle East franchise region. However, sales in the company’s owned businesses improved with strong performance in key markets such as India.

M&S now expects GM gross margin to be at the top end of the guided range of over 200 to 250bps. As a result of tight control of costs as well as lower volume growth, we the company has improved its operating cost guidance from over 4 percent to 2.5 percent.