• H1 general merchandise sales fall 0.4%
  • GM like-for-like sales down 1.2%
  • Group pre-tax profit drops 22.7% to GBP216m
General merchandise sales fell 0.4% in the first half

General merchandise sales fell 0.4% in the first half

UK retail group Marks & Spencer today (4 November) said its decision to focus on margins and discount less weighed on clothing sales in the first half, in what were “challenging market conditions”. 

General merchandise sales fell 0.4%, while like-for-like sales were down 1.2% in the six months ended 26 September. 

The retailer said that while unseasonal conditions and its decision to maintain full-price sales affected revenues, gross margin was up 285 basis points ahead of expectations of 150-200 basis points, thanks to “significant” sourcing gains. 

M&S.com sales were up 34.2% thanks to higher than planned sourcing gains and lower discounting.

“We continue to focus on improving product quality and style with customer perception measures continuing to improve,” M&S said in its update. “We further developed our in-house design capabilities appointing a design director for clothing.”

Queralt Ferrer was promoted as the group's first director of design for women's wear, lingerie and beauty in September. The appointment was part of a reshuffle under new general merchandise head Steve Rowe, as the retailer attempts to turn the fortunes of its clothing division around. 

Group pre-tax profit for the period was down 22.7% to GBP216m from GBP279.4m in the prior year. Revenues edged up 1% to GBP4.95bn, while UK sales grew 1.7% driven by strong growth in the food business. International revenues were down 5.1% as a result of euro currency pressures. 

Looking ahead, M&S warned that, despite some improvement in consumer confidence, market conditions continue to be challenging in both the UK and abroad. Short term priorities, it said, remain the same: food sales growth, general merchandise gross margin improvement, improved general merchandise performance and strong cash generation.

Shore Capital analyst, Darren Shirley, noted: “We‎ cannot deny that we would much rather be writing about stronger general merchandise trading from M&S, so seeing through the positive momentum that commenced at the start of calendar 2015. 

“However, and we have been in this position many times before, it was not to be. Whilst so, management is running the business effectively given trading conditions in our view and seeking to balance the performance effectively for its stakeholders. The group performance is also hindered by international challenges, where M&S is not alone.”