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Marks & Spencer Q3 sales decline as clothing underperforms

By Michele Maatouk

Date: Thursday 09 Jan 2020

Marks & Spencer Q3 sales decline as clothing underperforms

(Sharecast News) - Marks & Spencer reported a decline in third-quarter sales on Thursday as the clothing and home segment underperformed and the retailer cautioned that gross margins for the year would be at the lower end of guidance.
In the 13 weeks to 28 December, sales fell 0.6% to £2.8bn, with international revenue 2.3% lower at £251m. Food sales were up 1.5% on a total basis but clothing & home revenue declined 3.7%.

On a like-for-like basis, revenue ticked up 0.2% as rise in food sales helped to offset falling sales in clothing & home. LFL food sales were up 1.4% while sales from the food and clothing business slipped 1.7%. The company said the food segment performance stood out over the two-week Christmas period "as customers responded to sharper value and more relevant innovation".

However, the Clothing & Home performance was dented by underperformance in Menswear and Gifting.

Online sales in the clothing and home division grew 1.5%, which was less than the company had been expecting, due to competitor discounting in December and lower furniture dispatches at the start of the quarter.

Chief executive Steve Rowe said: "As we drive a faster pace of change, disappointing one-off issues - notably waste and supply chain in the Food business, the shape of buy in Menswear and performance in our Gifting categories - held us back from delivering a stronger result.

"However, the changes we made earlier in the year in Clothing have arrested the worst of the issues of the first six months and we are progressively building a much stronger team for the future."

M&S said full-year guidance was unchanged, although gross margins were expected to be around lower end of guidance, largely offset by the cost reduction programme.

At 0820 GMT, the shares were down 7.3% at 202.50p.

Neil Wilson, chief market analyst at Markets.com, said: "By its own admission, the effort to shake up clothing and home has fallen behind. The string of high-level departures points to the troubles. Steve Rowe has taken over directly and binned senior staff. It's never a great plan for a CEO to go down this route, but progress was too slow. If it doesn't pay off, his head may be the next to roll.

"Full year profit guidance is unchanged, which will be a relief, but margins are seen at the lower end - hardly a surprise given the combative environment and the well-worn problems at M&S. This raises questions about whether management's profit guidance is credible - I think the market believes there could be another warning if margins are being creamed."

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