M&S back in fashion as shares rebound: Sales of crucial womenswear ranges finally turn a corner
Shares in Marks & Spencer jumped nearly 10 per cent after the embattled retailer finally showed signs its turnaround might be working.
Investors breathed a sigh of relief that Britain’s biggest clothing chain was at last able to say that its troubled womenswear ranges had improved.
Underlying sales for womenswear grew at 1.3 per cent for the first five months of the year.
Best foot forward: Investors breathed a sigh of relief that M&S was at last able to say that its womenswear ranges had improved
Once the mild month of September was added, the underlying sales figure dropped by 1.5 per cent.
High Street rival Next, and youth retail chain SuperGroup have both issued profit warnings, saying shoppers were not buying winter coats and hats.
However, on Tuesday Primark, owned by Associated British Foods, shrugged off the warm temperatures claiming its £25 Boucle Coat had proved popular with shoppers and flown out of its doors.
Despite the improvement at M&S, which drove the share price up 39.4p to 440.1p, the jury is still out over whether the firm has reached its bottom and is now on the rebound.
While total sales rose to £4.9bn for the six months to September 27 from £4.8bn, underlying sales for the business were still negative, falling 0.7 per cent.
Most importantly, general merchandise which includes clothing and home furnishings like bedding, was down 2.9 per cent.
The firm breaks out clothing and footwear, saying this was down 2.2 per cent. It claimed the weather hit sales to the tune of 2.5 per cent suggesting they may have been higher under normal conditions.
Regardless of the reason, 13 quarters of declining clothing sales is not a good record and chief executive Marc Bolland is still under intense pressure to reverse this.
Neil Saunders, managing director of consultant Conlumino, said: ‘On the face of it, the latest M&S numbers look rather lacklustre.
‘Given that womenswear is one of M&S’s most problematic categories this swing into positive territory is a sign that the years of decline may well have bottomed out and that M&S’s strategy of becoming more fashion-focused is starting to pay dividends.’
Investors were also buoyed by the first rise in the firm’s half-year profits in four years.
Bolland has managed to cut costs by using the scale of the business to negotiate better rates from suppliers, while making delivery routes more efficient.
First-half pre-tax profit before one-off items was £268m, up from £262m. But the pure pre-tax profit figures were flat at £279.4m.
In a clear sign of confidence M&S raised its interim dividend by 0.2p to 6.4p a share.
However, the online business was still in the sick bay – down 6.3 per cent for the half due to a shift in running the website itself instead of using an external provider. Bolland felt it was premature to signal a turnaround, saying: ‘Things are coming together we have seen good indications that the priorities we are focused on are delivering.’ When asked if he still felt under pressure over keeping his job he said: ‘I look forward to the next few years delivering.’
The food business was a star performer showing underlying sales up 1 per cent and announcing plans to open 200 Simply Food stores over the next few years. This is an increase from a previous target of 150.
Sales at the international business were also up 1.2 per cent.
‘The years of decline may well have bottomed out’
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