Expected yet still disappointing: Marks & Spencer’s Q1 sales fall

Not for being expected the decline has been any less disappointing for Marks & Spencer’s shareholders. “Challenging” conditions dragged the British retailer’s general merchandise sales – which include clothes – by 0.4 percent over the first quarter.

Nevertheless, the decline was better than that of the same period a year ago, when sales of general merchandise fell by 1.5 percent.

Chief executive, Marc Bolland, commented the news saying that “In general merchandise, sales were broadly level on last year and we are on track to deliver the planned increase in gross margin.”

Marks & Spencer posts an expected decline in the first-quarter sales

Bolland blamed the like-for-like 0.4 per cent fall in general merchandise on the cooler weather in May, and heavy discounting over June.

In this regard, Paul Rossington, analyst at HSBC, said: “Were it not for the cold weather in May, the impact of which is evident at sector level, we would have expected GM top-line growth to continue. Despite this short-term setback, we believe that the long-term turnaround strategy is intact.”

In the words of Richard Hunter, analyst at Hargreaves Lansdown, “The elephant in the changing room remains, in the form of General Merchandise. Whether M&S can ever return to former glories by enticing clothes shoppers back to its stores is arguably its largest challenge, even though the more recent experience implies at least a stabilisation of previously dropping numbers.”

On the upside, Marks & Spencer reported a boost to online, with its digital sales upping by 38.7 percent, after the 131-year old retailer invested and overhauled the site.

Shareholders have gathered at the group's annual meeting at Wembley Stadium in London on Wednesday, with the stock up 1 percent, or 4.0 pence, at 551.0 pence ahead of the meeting. It is worthy a mention that this has not been an easy meeting for Marks and Spencer’s board, as it has faced a bombardment of criticism from shareholders at its annual general meeting.

Criticism mainly referred to the poor design of its clothes to a failure to adopt the Living Wage, and calls for more transparency in its international reporting.

In May, the firm reported underlying profits for the year to March 28 rose 6.1 per cent to 661.2 million pounds, easing some of the intense pressure Bolland has been under in recent years, recalls the ‘Guardian’.

The group also said it will launch a 150 million pounds share buyback programme for investors, which is due to begin on July, 8.

Conlumino Senior Consultant, Anusha Couttigane pointed out that “While its final quarter results last year represented M&S’ first signs of sales growth in its core clothing division for fourteen quarters, general merchandise, which includes clothing, has once again slipped into decline over Q1 2015/16. Total UK sales in the division saw marginal growth of +0.2 percent, though this constituted a -0.4 percent decline when measured on a LFL basis.”

“Yet M&S’ decline in clothing is an all too familiar story. This is a trend that it was hoped was in reverse permanently when M&S delivered its final quarter results in April. Instead its weak performance this quarter has once again resulted in flat LFLs overall for the UK. This indicates that, while its Food division is certainly praiseworthy, it cannot be relied upon to offset declines across the UK business. Although we have entered a promotional period in the fashion calendar, this weakness in clothing is a set-back for M&S, especially as exchange rates have limited the profitability of international sales,” added Couttigane.