Sales for the 14-week period to 7 July declined by 2.6 per cent, with strong progress in Food (+5.9 per cent) offset by the performance of Clothing, Footwear and Gifts (-9.1 per cent).

However, the result of more cost-effective clothing buying is delivering the planned benefit of some three percentage points to the primary margin, and together with better control of stock commitment has delivered a much-improved net achieved clothing margin percentage for the period.

The reported decline in Home performance (-1.5 per cent) is distorted by poor furniture sales in April following the announcement of the intention to close the Direct Clothing Catalogue operation. The Group policy not to sell non Marks & Spencer branded products has also impacted the Home business. Home sales performance over the past eight weeks has been approximately +4.8 per cent.

The Food business continued the strong performance following the foot and mouth crisis, delivering sales growth for the period of +5.9 per cent.

Looking ahead, the early feedback from customers and fashion experts on our Autumn womenswear ranges has been positive, recognising the move back to offering customers classically stylish clothes of excellent quality and value.

The Per Una collection, supplied by George Davies, will be launched in 90 UK stores during October, targeting younger women and complementing the core ranges. In addition, over 90 stores representing approximately 50 per cent of UK footage will be refurbished this year, two-thirds before Christmas. These enhancements will be very visible to customers, substantially improving their shopping experience.

Building on the continued success of the Food business, a new smaller store format, "Marks & Spencer Simply Food", has been developed. The format is being trialled in two locations, Surbiton and Twickenham, this month.

Corporate restructure update
On March 29, the Group announced the intention to close the subsidiaries in Continental Europe, franchise the Hong Kong stores and sell Brooks Brothers and Kings Super Markets, while retaining the franchise stores worldwide and the wholly owned business in Eire.

As part of the process, the Group is consulting with employees on the intention to close stores in Continental Europe, and subject to the outcome of this consultation, will consider all possible methods to achieve a disposal that, as far as practicable, preserves employment. The International programme overall is proceeding to plan and announcements will be made as soon as any negotiations are finalised.

The Group has also announced it would release value from a substantial proportion of the UK property portfolio, which in total had a book value at 31st March of some £2.5bn. A range of options are under consideration, including:

  • Outright sale of non-operational properties
  • Sale and leaseback
  • Property securitisation

These transactions are on track and the Group expects to raise approximately £800m in total within the current financial year, including an intended £300m to be raised from the sale and leaseback of approximately 80 stores already announced. Further announcements will be made as and when transactions are concluded.

Additional transactions will follow in due course. These will include the Baker Street Head Office, as the Group relocates to new premises at Paddington Basin in 2003.

The announced closure of the Direct Clothing Catalogue operation has been completed. The Group continues to operate a successful Home Direct business.

The best ways for our shareholders of returning the £2bn are being evaluated and we will communicate the preferred method well ahead of the due date of March 2002.