Marks & Spencer said this morning that like-for-like sales fell 1.4% in the 13 weeks to June 27 – not exactly brilliant, but a lot better than everyone was expecting, and a lot better than the 4.2% drop it reported last quarter. It’s a welcome boost for executive chairman Sir Stuart Rose, as he prepares to face down disgruntled shareholders next week. Although M&S has clearly fallen a long way from its heights of two years ago, at least he seems to have stopped the rot…
The City was predicting a drop in the region of 2.5% - so although this was the seventh consecutive fall in M&S quarterly sales, today’s figures do suggest things are finally starting to move in the right direction. General merchandise sales were down 2.4%, a big improvement from last year’s 6.9%; while food sales were down 0.5%, compared to 5% last year – an indication that the discounts introduced by new food boss Mark Dixon (like the ‘Dine in for £10’ offer) are having some effect at bringing customers back into the stores. Rose said today that the result ‘demonstrates that the actions we are taking are working’ and suggested that ‘consumer confidence appears to be stabilising’.
On the other hand, shareholders will be painfully aware that these food sales still look pretty feeble in comparison to other food stores like Morrisons, Asda and Sainsbury’s, all of whom are making out like bandits at the moment. Two years ago, M&S posted profits of over £1bn – this year, analysts think it will lucky to make half that. Sales are still sliding, and discounting will hammer margins. So Sir Stuart is unlikely to get an easy ride at next week’s AGM, particularly since he’s slashed shareholders’ dividend by a third in a bid to preserve cash.
Then there’s the thorny problem of his succession. Some shareholders will be tabling a motion next week forcing him to give up the combined chairman/ CEO role. Sir Stuart is due to retire by 2011, and apparently the search for his successor as CEO is under way – but that will presumably take some time, and there’s no sign of him bringing in an independent chairman. His supremo role is a lot harder to justify now he’s no longer presiding over a company making a billion pounds a year. Still, these figures suggest the worst may be over - which should buy him a bit of breathing space...
In today's bulletin:
National Express reeling as East Coast mainline nationalised
Tesco to bid for Northern Rock?
Rose lives to fight another day as M&S shows signs of life
Industry recovering - but Diageo cuts 900 jobs
'35 Under 35' in focus: The engineers are coming