M&S food has ‘standout’ Christmas amid clothing gloom

By August Graham, PA City Reporter

Marks & Spencer’s food division had a “standout” performance over Christmas, helping lift what was otherwise a disappointing trading period for the business.

UK food revenue grew 1.5% to £1.7 billion in the three months to the end of December, the company said.

However, M&S clothes stores fared much worse, with sales in the clothing and home division dropping 2.7% to £1.1 billion in the third quarter.

On a like-for-like basis, which strips out the effect of new stores and closures, UK revenue grew 0.2%.

M&S chief executive Steve Rowe (M&S/PA)

Chief executive Steve Rowe said: “The food business continued to outperform the market, and clothing and home had a strong start to the quarter, albeit this was followed by a challenging trading environment in the lead-up to Christmas.”

He added that “disappointing one-off issues” such as waste in the food business and the performance of its gifts range “held us back from delivering a stronger result”.

On a call with reporters, Mr Rowe said that, although customers purchased a lot of M&S food, “we bought more than we sold”, but he promised that no food waste went to landfill.

The business stuck to its guidance, but warned that gross margins are likely to be at the lower end of expectations.

(PA Graphics)

Meanwhile, online clothes sales failed to bring much Christmas cheer for M&S management. Online clothing and home revenue in the UK was up 1.5% – lower than expected.

The business said it had to deal with competitors offering discounts to customers, and less furniture being dispatched.

In a bid to remedy the problems, M&S improved its search and rationalisation functions and launched an option for customers to pay in instalments.

International sales fell 2.3% to £251 million.

Richard Lim, chief executive of consultancy Retail Economics, said: “Food performed particularly well, benefiting from stronger underlying household finances, but consumers also responded positively to more competitive pricing.

“It appeared that shoppers were prepared to indulge that little bit more this Christmas on food if they spotted value for money.”

He added: “While clothing and home lagged overall growth, it still improved on previous performances. The major disappointment came in the online business that barely showed any meaningful signs of growth.

“Integrating a seamless digital proposition remains the key challenge for the retailer.”