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Marks & Spencer general merchandise recovery falters

Marks & Spencer’s clothing recovery was hampered in the 13 weeks to June 27, as like-for-like sales of general merchandise fell 0.4% after a return to growth just six weeks ago.

The retailer described the period as a “challenging and promotional quarter” with chief executive Marc Bolland blaming a difficult May, which led to heavy discounting across the market in June.

However, the dip is less than the 1% decline predicted by analysts at the start of the week.

Overall UK sales were flat on a like-for-like basis, boosted by sales on M&S.com, which were up 38.7%. M&S said its full-year guidance remains unchanged.

Bolland said: “We continue to make progress against our key priorities. Our food business did very well in a difficult market. In general merchandise, sales were broadly level on last year and we are on track to deliver the planned increase in gross margin. M&S.com performance was very strong, with customers appreciating all the improvements to our website.”

John Ibbotson, managing director of retail consultancy Retail Vision, commented: “While its all-important general merchandise results are marginally better than expected, like-for-likes have still declined against an easy comparative. However you dress this up, it’s still not good enough.

“The hard numbers show that Marc Bolland’s much touted recovery in general merchandise has come off the rails once again, so it’s no wonder there is shareholder dissatisfaction with his bonus.

“M&S may have increased its margins, but this is a retailer that lives or dies on the performance of its general merchandise, and the performance there is consistently poor.

“Time is running out for Bolland and no amount of free in-store collection will stop that.

“As hard as it is to stomach, the one-time colossus of British retailing is now an also ran, with the likes of Next, Primark and the internet operators ripping away its clothing market share.

“It’s make or break time for M&S. No amount of restructuring and transformation of IT and logistics will be enough if clothing sales don’t improve soon.”

Phil Dorrell, partner at retail consultantancy, Retail Remedy added: “The previous quarter did well, better than most expected, on the back of good PR and having enough stock of what the customer wanted to buy. However the underlying issues have not been addressed.

“Whilst Marks and Spencer are to be applauded for attracting great press for one or two key pieces each season, the fanfare does not translate through to sales. These pieces rarely have the distribution or stock to be able to deliver anything more than column inches.

“One can’t help but look at M&S as two separate businesses, one operating seamlessly, the other stumbling from one quarter to the next.

“While we hope that the womenswear buy is as strong as the next red hot piece to hit the fashion press, it is ultimately about how it is delivered in store.

“Marks and Spencer store formats leave customers drifting from one sub brand to another without knowing where they are going. The best range could still be disappointing without a concerted effort in visual merchandising and branding.”

The update comes ahead of its annual meeting later today, during which Bolland and other M&S directors will face shareholders.

@LukeToddUK

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