Marks & Spencer has reported yet another decline in general merchandise sales during the third-quarter, blaming unseasonal weather and higher levels of discounting across the market. And with that, analysts believe the retailer must work harder and faster to turn around its fortunes.
Bernstein Research analyst Jamie Merriman:“Given recent Kantar market share data in apparel, which suggested M&S had lost share versus last year for the seventh consecutive quarter of data (on a 52 week rolling basis) we had expected M&S to underperform the overall market. However, this level of like-for-like sales decline suggests M&S underperformance was even worse than expected.”
“This top-line performance is disappointing, coming in even worse than expectations that had already been lowered going into the results. The results suggest that the autumn/winter collection, highlighted as the first collection entirely produced by the new GM management team, has not fundamentally changed the division’s performance.”
Hargreaves Lansdown analyst Keith Bowman:“Given low prior expectations, investors appear to be breathing a sigh of relief. Sales have proved to be no worse than forecast, with profits generated via better food sales compensating for discounted non-food or GM sales.”
“For now, investors are still being asked for patience. Signs of a turnaround for its GM business have emerged, whilst the food business continues to take up the slack. Nonetheless, performance remains a long way from rival Next, with the directory business now streets ahead of M&S.com. In all, the former Morrisons chief executive continues to be given the benefit of the doubt, with analyst opinion coming in at a hold, albeit a firm one.”
Conlumino analyst Neil Saunders:“Taking the third quarter as a whole, M&S has posted a poor set of numbers which, on the general merchandise front, make for very discouraging reading.”
“All of this raises a question mark over how successful the new GM strategy is. At a broad level we still maintain that, on clothing, the pace of change needs to go further and faster. Moreover, we believe that greater focus and clarity is required in delivering for the target market. Over the next ten years the most significant opportunity in clothing comes from the older, younger at heart generation of over 50s. It is far from clear that M&S is fully addressing the needs of this important constituency.”
“In a nutshell, however M&S is still telling the same old story: a great food business with a general merchandise business that simply must try harder.”
Investec analyst Kate Calvert:“Same old Christmas story – industry outperformance from food and an unsparkling one for general merchandise, with weather and heightened promotional environment contributing to the spoilt party. This results in a 5% cut to FY14E profit before tax. However, we believe progress has been made on women’s wear. With FY14 the last year of elevated capex, the business should then become cash generative.”
Click here to see what M&S chief executive Mark Bolland had to say about the results.