Marks & Spencer trading update: what the analysts say
Marks & Spencer today reported a 0.7% decline in first quarter sales for the three months ended 30 June. UK general merchandise recorded the steepest decline, with sales down 5.1% over the quarter. The company also said general merchandising executive director Kate Bostock is set to leave. Here is a flavour of what leading retail analysts are saying about the news.
Richard Hunter, head of equities, Hargreaves Lansdown Stockbrokers
"As largely expected, the weather has resulted in an update from M&S which is something of a damp squib.
In particular, the decline in general merchandise has continued, albeit for different reasons. This in part has caused yet another management change, which is unsettling given the perception that M&S has yet to find its new niche. Whilst sales remain under pressure in a fiercely competitive environment, the more successful retailers have themselves reported numbers which could imply a deeper problem at M&S."
Paul Mumford, senior investment manager, Cavendish Asset Management
"The big disappointment today with Marks & Spencer's results lies with like-for-like sales in merchandise, which are down nearly seven per cent. This seems likely to be a general consequence of weak consumer spending and poor weather, hitting its summer range and womenswear particularly hard. Other retailers in this space such as JJB Sports have also seen similar falls in the period."
Bethany Hocking, analyst, Investec
"The ongoing out-performance of Food is making M&S a structurally lower gross margin business, with Food gross margin c.20ppts lower than Clothing. Clothing still accounts for roughly half of profits, however, so issues there are in need of a solution and the management changes are thus positive, but most don't occur until October, so it is very early days."
Neil Saunders, managing director, Conlumino
"Overall this is a very weak set of numbers that is explained only in part by poor trading conditions on the high street; the rest of the explanation comes down to issues that are specific to M&S. Indeed, the trading period covers some more robust months of overall retail growth and M&S's figures compare relatively badly with competitors operating across similar sectors. Moreover, the results for general merchandise are set against comparatively subdued numbers last year, demonstrating that M&S has gone from a position of standing still to one of moving backwards.
"By our calculations, M&S has ceded market share in clothing - with an especially sharp contraction in women's wear, has lost some share in home but has made gains in food. This mixed bag reflects the differential performance of the various parts of the business and underlines the fact that the clothing is still a problem child that needs to be brought into line."
Sam Hart, analyst, Charles Stanley
"We expect trading conditions in UK general retail to remain challenging over the medium term, with the consumer environment subdued and competitive landscape intense. The bias of the M&S customer base towards older demographics and more prosperous socio-economic groups, however, means we expect demand to be relatively resilient. Significant self-help opportunities also exist at M&S, particularly in the areas of on-line, International and the supply chain. The shares look cheap and the yield is attractive, but we see little prospect of a sustained share price recovery whilst consensus earnings forecasts continue to tick downwards."
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