M&S clothing sales rebound during Christmas trading period
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Business |ANALYSIS
London - The tide finally seems to be changing for struggling high street department store Marks & Spencer, as the group saw its apparel and homeware sales returned to black. M&S reported a 2.3 percent growth in clothing and homeware sales over the Christmas trading period, the first time in two years the ailing division reported a like-for-like growth and the first time M&S has reported sales growth during the holiday season over the past six years.
M&S clothing and homeware sales grow 2.3 percent during the Christmas trading period
M&S apparel and homeware sales exceeded analysts predictions of a modest 0.5 percent growth, under the leadership of the department store’s new chief executive Steve Rowe, who said that “better ranges, better availability and better prices” helped the division sales grow during Christmas. Marks & Spencer noted that its sales had been helped by a more favourable timing of Christmas holidays this year, which included extra shopping days, and had likely added approximately 1.5 percent to the clothing and homeware sales growth.
“It was a huge risk to footfall and volumes to significantly reduce the level of promotions and discounts in Q3, given the intensity of price cuts elsewhere on the high street and greater retailer participation in Black Friday,” commented Honor Strachan, lead analyst at Verdict Retail, on M&S Christmas trading results.“Demanding consumers have become so accustomed to discounts, Steve Rowe’s plan had potential to backfire, but seemingly the quality and value of its products – particularly in knitwear and cashmere collections – was enough to lure shoppers in.”
“Moreover, permanent price drops across clothing during 2016 will have aided shopper conversion levels. While the difference in trading period versus last year has inflated clothing & home growth by 1.5 per cent, and it was up against terrible comparatives, this should not take away from the fact that M&S’s strategy to focus on value, rather than reactionary and desperate discounting...despite driving full price sales throughout much of the quarter, it entered the sale with 7.0 per cent less stock, having eliminated overlap across collections and focussing on improving the availability of best selling lines.”
However, in spite of M&S’s positive non-food Christmas trading results, Rowe warned that timing would not be in their favour for the department store next trading update. “As we look forward, our Q4 reported numbers will be adversely affected by sale timing and a later Easter,” said Rowe in a statement. “Against the background of uncertain consumer confidence the business remains focused on delivering the strategic actions announced last year.”
Last September saw Rowe announced that M&S would be axing up to 500 senior roles in the UK. Two months later, he aded that M&S would close around 30 UK stores and transform an additional 45 retail locations into M&S food-only stores. Marks & Spencer also revealed it would be shuttering a number of its locations overseas, in markets where the department store struggled to remain profitable.
Although analysts welcomed the department store’s latest results, they agreed that M&S still had ways to go before committing a full turnaround in its clothing and homeware performance. “The test now is to continue this momentum into spring/summer – a season which is harder for M&S to buy for than autumn/winter, due to lighter weight fabrics and designs making consumers more willing to trade down," added Strachan.
Richard Lim, Chief Executive, Retail Economics noted: “M&S also capitalised on the collapse of BHS last summer with both retailers once occupying many of the same high streets across the UK. With the remaining BHS stores boarded-up well before Christmas, they were the prime destination for many town centres.”
“This year will prove much more challenging with our research showing Brexit topping consumers’ concerns for 2017. We forecast inflation will hit 3 percent this year which will squeeze disposable incomes for many families. Trying to push through rising costs during these times will be a real test of loyalty for Mrs M&S."
M&S trading update comes on a noticeable busy day for Christmas updates, with Debenhams and Asos also announcing positive sales during the festive season. High-street rival Debenhams reported a 1 percent increased in UK like-for-like sales over Christmas, in addition to a 13.9 percent increase in online sales. Online pure player Asos saw its UK sales increase up 18 percent, and has increased its full-year sales guidance by 25 to 30 percent, following the devaluation of pound.
Photos: Courtesy of M&S