M&S clothing turnaround a "priority" as sales tumble
- Q4 clothing and home sales down 1.9%
- Like-for-like sales fall 2.7%
- Gross margin to be 240 to 250 bps
M&S said it saw some progress in its clothing and home sales division
Turning around its clothing and home businesses will be the priority for Marks & Spencer, new CEO Steve Rowe has said, as the UK retailer revealed lower sales for the division in its fourth-quarter.
M&S said it saw some progress in its clothing and home sales in the 13 weeks to 26 March, as it reduced the proportion of sales on promotional discount. Nonetheless, sales were down 1.9%, while like-for-like sales fell 2.7%.
There was a significant increase, however, in gross margin for the unit, which is expected to be between 240 to 250 basis points. M&S, which will report its full-year results on 25 May, said continued improvement in buying margin and some investment in price has helped.
Former head of general merchandise Rowe, who took over the role of CEO from Marc Bolland at the weekend, said improving the offer in the retailer's clothing and home business is its number one priority. An update on its plans here is expected in May. Earlier this week he said he will also retain direct control of M&S's key clothing business, which has suffered years of falling sales.
"In clothing and home, we faced a challenging backdrop characterised by price deflation and a flat market. Spring/summer season launched with significantly higher product availability than last year. We continued to make improvements across range and design, for example, our Autograph sales were up 10%. We also began to reduce the proportion of sales on promotional discount and will continue to do so as we head into the new financial year.
"However as flagged at quarter three, we had more stock into sale. At the same time, we invested in sharpening our prices on a number of lines, whilst delivering a strong gross margin improvement. Although these actions contributed to the sales run rate improving since the last quarter, we still have a number of areas to address."
Online sales grew 8.2% thanks to further improvement in customer satisfaction, the retailer said. Group sales were up 1.9%, while UK sales grew 1.6%. Like-for-like sales, however, dropped 1.1%. International sales were up 3.8%.
"That general merchandise performance against a reasonably tough comparative for a division that has sustainably struggled to build same-store sales must be the key priority for new CEO, Steve Rowe, to address to our minds," noted ShoreCap analyst Clive Black. "How he plans to do so will be the subject of much market interest for all stakeholders as the outcome of his plans will ultimately determine the success or otherwise of M&S' share price performance for the immediate future."
Honor Westnedge, lead analyst at Verdict Retail, adds that while margin improvement continues to be the headline in clothing and home, "M&S must start to deliver sales growth to recoup lost market share and improve competitiveness against strengthening rivals."
She continues: "Clothing sales continue to decline, despite years of investment, focus, management reshuffles, rebranding and brand rationalisation. Steve Rowe has his work cut out to restore consumer confidence in its womenswear offer and acquire new shoppers to the M&S brand – something Bolland tried fearlessly to achieve but with minimal results.
"That said Bolland has left behind a much stronger infrastructure such as advanced online capabilities, a streamlined sourcing and manufacturer base and enhanced fulfilment and logistics capabilities, leaving Rowe to focus on one key element: the product."
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