The M&S share price took a hammering this morning – it was down nearly 20% at one stage, wiping £1.5bn off its value – after the retailer revealed some rocky results for the third quarter of its financial year. Although overall sales were up, the like-for like figure (which provides a more direct comparison with last year) fell 2.2%. It’s the first time in two years that M&S has seen a quarterly drop in sales, and given its status as a bellwether for the high street, this will only add to the general gloom.
Britain's Most Admired Company felt the pain of a disappointing Christmas trading period right across the board. General merchandise sales were down 3.2%, include a 1.2% drop in clothing, while even its seemingly bullet-proof food division was down 1.5%. And that’s despite its prices being 6% lower than last year. 'Market conditions became more challenging through November and December,' newly-knighted boss Sir Stuart Rose admitted in the statement.
Rose provided a typically robust defence on Radio 4’s Today programme this morning, arguing: ‘We have sold more goods to more people than we did last year, but you have to run very hard to stand still at this level.’ Unlike some of its rivals it wasn’t forced into heavy discounting before Christmas, he said, and post-Christmas sales were looking good.
Nonetheless, he didn’t sound very optimistic about the high street’s prospects for 2008. ‘It's going to be tough out there and we will all suffer from it,’ he told the BBC – although he insisted that M&S’s strong product offering, value proposition and balance sheet would make sure it continued to outperform the market.
It’s not as though M&S is doomed; it still has a good shot at making £1bn profit this year, and it’s better placed than most to weather the upcoming storm, for all the reasons Rose outlines. Nor is it the case that every retailer is struggling – John Lewis and Selfridges have both been making money hand over fist this Christmas, as have smaller groups like Majestic and Game.
But when you hear someone like Rose sounding so gloomy, it’s bound to make a few of the lesser retailers very nervous indeed...