Smaller-than-expected sales fall by M&S boosts ailing sector

Jul 2 2009 by Graeme Brown, Birmingham Post

Retail giant Marks & Spencer has provided a boost for the ailing retail sector by announcing a smaller-than-expected fall in sales.

Chief executive Sir Stuart Rose, who has been criticised over recent trading and corporate governance issues, said there were signs of an improved trend in M&S’s performance but added he remained cautious about prospects for this year and next.

Like-for-like sales in the UK dropped 1.4 per cent in the 13 weeks to June 27, bettering the previous quarter as well as forecasts in the City.

M&S shares jumped four per cent in early trading after the announcement while Sir Stuart’s comments about a more stable picture for consumer confidence boosted rival stocks such as Next.

City firm Numis Securities added £26 million to its M&S profits forecast after the update but its estimate for a surplus of £550 million in the year to March is still down on this year’s reported £604 million.

Numis believed the warm weather helped trading, particularly in clothing after total sales in the category improved by 1.4 per cent and M&S grew market share.

M&S’s sales troubles recently caused full-year profits to tumble 40 per cent while it cut its annual dividend by 33 per cent – the first such move since 2000.

Like-for-like UK sales for the last full year fell 5.9 per cent, including a 6.9 per cent drop in general merchandise and a five per cent decline in food. But the fourth quarter suggested a moderately better performance, with sales declines easing to leave sales down 4.2 per cent on a like-for-like basis.

Sir Stuart said: “Consumer confidence appears to be stabilising. However we remain cautious about the outlook for the remainder of this year and next year and will continue to run the business accordingly.”