Marks and Spencer reported a sharp fall in third-quarter sales as earlier store closures hit and warned it was planning for the latest national lockdown to last “potentially until Easter”.
Clothing and home sales fell 24.1 per cent in the 13 weeks to December 26, with strong growth online not sufficient to offset the closure of shops in England for the whole of November. But this was better than market forecasts for a decline of 30 per cent.
“It wasn’t the Christmas we had hoped or planned for,” said chief executive Steve Rowe, who nevertheless hailed a robust performance in the company’s increasingly important food business.
Same-store sales in food rose 2.6 per cent or 5.7 per cent if the impact of closing in-store cafés is stripped out. Analysts had been expecting broadly flat food sales.
In the four weeks before Christmas, food sales were up 8.7 per cent, driven by strong sales of premium items such as turkey gravy and luxury vegetable selections.
The overall growth rate in food was less than the 9 per cent increases reported by supermarket groups such as Wm Morrison and J Sainsbury, reflecting M&S’s exposure to high streets and travel locations where shopper numbers have declined sharply.
Also, M&S does not consolidate sales made through its joint venture with Ocado into its own revenues. In its most recent update, Ocado Retail reported a 35 per cent increase in sales for the 13 weeks to end-November and upgraded profit forecasts for the third time in a year.
Mr Rowe said that efforts to reshape the 136-year-old company were continuing and starting to show results, and that the current lockdown would have less financial impact than the first one. “We worked very hard over the summer to get our stock in the right shape”
But he added that lockdowns brought “huge swings in customer behaviour”, noting that there had been a fivefold increase in ladies’ nightwear sales in the week following the latest one. “We are all wearing pyjamas again”.
Staff absence rates had doubled over the past few weeks to around 10 per cent nationally, with higher rates in the south-east.
Asked about the company’s interest in Jaeger, the fashion brand that was put into administration late last year, Mr Rowe said that while the company wanted to build an online offering of “curated brands and merchandise in adjacent areas to our own offering” he had “no intention of turning M&S into a department store”.
“We are not on the acquisition trail as such,” he added. “Things may appear on the market and we may have a look at them. As the core brand becomes more contemporary it does create some gaps”.
He denied any interest in the Arcadia stable of brands. “The leap of faith you have to have to say that something like Topshop is adjacent to M&S is massive,” he said, adding that the effort needed to integrate it would also be considerable.
Analysts said the performance was robust under the circumstances but full-year forecasts — the market average is for underlying pre-tax profit of £107m — would come down to reflect the impact of the current lockdown.
Shares in the company were down 1.8 per cent in early trade.
However, Kate Calvert at Investec said the cost saving and streamlining efforts were having an effect and that she expected M&S to “emerge from the pandemic more streamlined and in a stronger market position”.
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