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Flat fashion sales predicted for Marks & Spencer

Marks & Spencer is expected to reveal its fashion sales are flat on last year when it reports its second quarter results on November 4.

However, analysts have forecast a further improvement in its gross margin for the three months to September 30, thanks to cost savings in its supply chain and less markdown in stores.

“General merchandise sales are expected to be flat but gross margin improvement is key and it is expected to have benefited from a move to more direct sourcing,” said Kate Calvert, retail analyst at Investec.

Richard Chamberlain, managing director of general retail at investment bank RBC, agreed: “We are likely to see a softer sales trend in general merchandise again, with like-for-likes down slightly in Q2.

“However, this is likely to be offset by a strong gross margin trend due to better buying and potentially lower markdown.”

He added: “M&S’s gross margin should come in at least at the top end of its gross margin range for the first half and the stronger gross margin trend is likely to carry on into next year.”

M&S recruited Mark and Neal Lindsey as sourcing directors for general merchandise, with responsibility for clothing and footwear, in March 2014, and has been sourcing more of its general merchandise directly from factories.

Since then gross margin at M&S has consistently improved, and it predicts a further rise of 150 to 200 basis points for the full year to March 2016.

Estimates suggest the Lindsey’s could save M&S £200m over three years.

Group sales were up 0.4% to £10.3bn for the full year to March 28, while its underlying pre-tax profit rose 6.1%. M&S did not break out general merchandise.

Readers' comments (1)

  • Not being an analyst myself but I would suggest they deliver negative figures for this quarter and if they update on October even worse. Lets wait and see ?

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