Blog: Leonie BarrieM&S gets benefit of the doubt

Leonie Barrie | 31 March 2009

Investors appear to be giving M&S the benefit of the doubt, with shares rising 11.7% this afternoon after the company reported better-than-expected sales during its fourth quarter.

Even so, the figures don’t make for easy reading – and it’s perhaps a sign of just how bad things have got at the UK’s largest clothing retailer when a 4.8% drop in like-for-like general merchandise sales (which include clothing and footwear), and a 1.0% fall in UK clothing sales is seen as good news.

Compare this, though, with falls of 8.9% and 6.5% respectively in the third quarter, and it’s perhaps easier to see where the optimism is coming from.

There’s also the question of whether or not these are the first tentative steps towards a recovery. Executive chairman Stuart Rose says the retailer is putting right some earlier wrongs and has managed to cut costs by sourcing more efficiently without compromising quality or ethical standards.

He also believes the stores are attracting more mature customers with new lines like Portfolio, and says children’s wear has a market share at its highest level by both value and volume for seven years – although this is no doubt helped by the recent collapse of Woolworths.

But there are still concerns, of course – in particular how profit margins are likely to stand up against price cuts and, more worryingly, the impact of sterling's depreciation against the dollar. The retailer has already said it expects profit margins last year to be down by 1.75 percentage points.

The BBC’s business editor Robert Peston also argues that a structural change is taking place in the economy which will have profound implications on the retail industry.

He suggests that British households are saving rather than spending any disposable income they might have, and that taxes and interest rates will inevitably start to rise again. For retailers this ominously means that the lean years may have only just begun.


UK: M&S upbeat as Q4 sales fall 4.2%


Ethiopia unrest a sourcing risk?

Fashion retailer H&M and UK based glove and leather manufacturer Pittards both say they are monitoring the situation in Ethiopia closely after the country's government declared a state of emergency af...


Asia facing up to increased competition

Increasing competition for garment sourcing contracts is seeing China not only being challenged by other countries in Asia, but by sub-Saharan African and even Russian suppliers too. And it is pushing...


Cambodia raises garment worker wages

The monthly minimum wage for workers in Cambodia's textile, garment and footwear sector is set to rise to $153 from January next year, following a vote on the issue last week. The increase marks a ris...


Sportswear initiatives start to take shape

The results of two highly-anticipated initiatives in the sportswear sphere were revealed last week: the launch of Under Armour’s new UAS lifestyle brand and the first pair of running shoes created at ...

just-style homepage

Forgot your password?