Another grim trading update from M&S, which for the last few years has been the darling of the UK high street. UK like-for-like sales fell by a whopping 6.1% last quarter, with food and clothing sales both well down year-on-year. M&S boss Sir Stuart Rose, who blamed the dismal showing on the ‘fragile’ confidence of increasingly cost-conscious punters, is now planning to cut investment in the business over the next two years, as he looks to batten down the hatches and see out the storm. So he’s clearly not expecting an upturn any time soon…
Rose says M&S has responded to the ‘unpredictable’ environment by ‘offering our customers better values and more promotions across the business.’ In general merchandise (i.e. clothing and homeware), he insisted that M&S continued to offer ‘great quality, stylish product, combined with keen values across all price points’. But we’re not convinced customers agree – sales were down 6.4% on a like-for-like basis, and judging by the surprising jump in home sales last quarter, clothing presumably accounted for most of this. It’s a poor show when not even Myleene can shift your stock.
The food arm isn’t faring much better. Back in July, M&S parted company with food boss Steven Esom, the ex-Waitrose man, but it doesn’t seem to have helped. Like-for-like sales were down nearly 6%, as shoppers continued to desert higher-priced grocers for the cheap and cheerful delights of Aldi and Lidl (not to mention Asda and Morrisons). Rose is hoping that the division’s fortunes might pick up over the Christmas period, but he’s also looking to cut prices by trimming some of its profit margins. And across the group, he says M&S will cut spending, postponing store refurbishments to concentrate on supply chain improvements - not an ideal situation when you're desperately trying to revive your fortunes.
So it was a pretty gloomy picture all round – albeit not as bad as some in the City feared (hence the strange-looking bounce in the share price this morning). Just about the only bright spark (apart from a 34% jump in online sales, albeit from a relatively low base) was a 24% rise in international sales. M&S has just opened the first of what it hopes will be several stores in mainland China, and is also planning a big assault on India; eventually, it hopes to get up to 20% of group revenues from overseas.
And there’s another silver lining: as part of its bid to stem the customer exodus, M&S is finally getting rid of its ‘This is not just food’ adverts, to be replaced by a new campaign fronted by David Jason. This time next year, they’ll be millionaires.
In today's bulletin:
M&S tightens belt as sales slide again
Europe cool on US bail-out plan
House prices in fastest fall since 1991
Retail therapy for high street gloom
Apple's 'other Steve' on its inner geek