M&S reports drop in quarterly sales

Bloomberg

Marks & Spencer Group Plc (M&S) reported a fresh drop in quarterly clothing revenue and missed estimates for food sales, dealing a blow to Chief Executive Officer Steve Rowe as he seeks to revive the U.K. retail bellwether.
Same-store sales in the clothing and home division fell 1.2 percent in the 13 weeks ended July 1, London-based M&S said on Tuesday, having slumped by almost 9 percent in the comparable period a year ago. The median analyst estimate was for a decline of 1 percent.
“There is little evidence of a turnaround in clothing & home,” Berenberg analyst Michelle Wilson said in a note. “We believe this will continue to put pressure on profitability.”
The lackluster performance adds to evidence that U.K. consumers are tightening their purse strings amid a squeeze on disposable incomes that’s affected sales at DFS Furniture Plc and Debenhams Plc. The drop in clothing sales marks the second consecutive quarter that M&S has failed to meet low expectations, and raises questions over whether Rowe’s plan to close 30 U.K. stores will be drastic enough in the face of a long-term sales decline.
The shares dropped 0.7 percent to 336.9 pence in early London trading, extending a near 6 percent decline in the month leading up to the announcement.
The retailer’s update comes on the same day as a report from Barclaycard showing U.K. consumer spending growth slowed to 2.5 percent in June. About 46 percent of those surveyed said they are “feeling the squeeze” from inflation.

Food Disappoints
“Broadly I would describe the consumer as volatile,” Rowe said on a call with reporters. “They are very much shopping for now and they are cautious with their spend.”
M&S is continuing its effort to shift away from selling clothes at a discount and didn’t hold a clearance sale in the period, which the CEO said reduced same-store sales by about 2 percent. The strategy will remain a drag on sales growth for the next few quarters, although Rowe expects the retailer to progress toward positive comparable sales during that time.
In its food business, M&S’s growth engine of recent years, same-store sales fell 0.1 percent, missing analyst estimates for a gain of 0.6 percent. Rowe said a program to open about 250 new Simply Food outlets by 2020 is taking some sales away from nearby shops.