M&S sells more fashion at full price in Q1, sees positive sales by year-end

By

Sandra Halliday

Published
Jul 11, 2017

All eyes are on M&S this week as the bellwether for the health of the UK retail sector releases its Q1 trading update. And the news is? Good in parts. Not that it’s time to set off any celebration fireworks just yet as the turnaround is obviously still a work in progress.

But CEO Steve Rowe said after the latest trading update that Clothing & Home sales could turn positive by the end of the year.

But for now that's just specualtion. In the trading update itself the company showed that it can sell more of its clothing and interiors product at the original price it set without having to resort to an endless round of discounting.

The Clothing & Home unit saw a sales dip in the 13 weeks to July 1 of just 0.5% (or 1.2% on a comparable basis). Total sales were £852.1 million. That wasn’t bad considering the comparable drop was 5.9% in Q4 and analysts had been predicting a 1.3% fall for the latest period. So the retail giant beat their predictions this time… but only just.

Admittedly, the firm’s figures are flattered by easier comparisons with the year-ago period. But it’s clearly on the right track and it was an important step forward in that full-price clothing and homewares sales rose, with reduced discounting and no clearance sales during the period.

In fact, full-price sales were up around 7% and the company is only starting its summer clearance this week, a week later than last year, with terminal stock for the season significantly down.

That will be all-important when it comes to reporting earnings wit the profit figures, after all, being arguably far more important than sales when it comes to the bottom line.

TOTAL SALES

For the company overall, revenue rose 2.7% year-on-year to £2.531bn but was up only 1.8% currency-neutral. The increase was helped by a 5.8% rise in online sales to £184.8 million, which is encouraging given the problems M&S’s online ops had not so long ago.

International sales helped too as they rose 3.8% to £272.3 million, although they fell 4% on a currency-neutral basis. The total international sales figure was boosted by the weakness of the pound as exchange rates worked in M&S’s favour. The company said it has now closed 28 of 53 stores in the owned markets that it’s exiting.

Its Food division sales, which are bigger than Clothing & Home sales these days, were encouraging as the company continued to roll out food-only stores at the expense of general merchandise. They rose 4.5% to £1.407 billion, although they dipped 0.1% on a comparable basis.

CEO Steve Rowe stayed low-key. He said the performance was in line with the retail giant’s own expectations and that it remains “on track” with delivery of the plan it announced last year. He also kept the company’s sales and profits guidance unchanged.