BBC

Tuesday, 23 January, 2001, 14:03 GMT Fresh sales slump at M&S

Analysts need more convincing of revival Troubled retailer Marks & Spencer has unveiled a disastrous set of Christmas trading figures.

Overall sales fell by 5.1%, with the biggest falls coming in traditionally strong areas such as women's clothing and menswear.

Chief executive and chairman Luc Vandevelde said the overall appeal of the retailer's adult clothing ranges was "simply not good enough".

Sales on a like-for-like basis, excluding income from new stores, fell by 5.1% in the 16 weeks to January 20 and by 2.3% in the critical eight week Christmas trading period, to the same date.

Shares up

However, the drop in sales was not as bad as many investors had feared. M&S shares gained 3% as the markets opened on Tuesday.

Investors were encouraged by the fact that the department store had managed to maintain its profit margins and had not been drawn into a pre-Christmas discounting spree.

Another bright spot was an increase in home furnishings sales, up by 9.5%. Food also performed well.

Mr Vandevelde had earlier predicted that M&S would have one of its best Christmases ever.

Commenting on Tuesday's trading statement, he said: "We did not achieve the results I was looking for over the Christmas period.

"Food and home sales made further progress, but sales of clothing were poor.

"The overall appeal of our adult clothing range was simply not good enough."

Mr Vandevelde said the cost-effectiveness of the company's buying was improving.

But he added: "I am under no illusion as to the main challenge facing the business.

"We must offer our customers adult clothing ranges of consistently better design and appeal. I am absolutely committed to making this happen."

Time running out

Some analysts believe time could be running out for Mr Vandevelde to show he can deliver the turnaround he promised.

"The spring and summer ranges will be the turning point," said Amanda Large, retail analyst at Gerrard.

"These will be the first to be brought in under the new buying processes, under the new team, and it will be interesting to see if the core customers react, or if M&S has alienated them for good."

In November, M&S said sales in the first five weeks of the second half of its year had shown a 15.7% like-for-like fall in general merchandise, including clothing and homewares.

It also said there had been a 4.6% gain in food sales, bringing the total figure down to 8.4% in comparable stores.

M&S, once the undisputed star of the UK retailing industry, has suffered an alarming decline in the past three years.

Its share price is about a third of its value three years ago, standing 3p higher at 203p in early trading on Tuesday.

The decline has continued despite a variety of personnel changes, and innovations such as accepting credit cards, launching its first ever advertising campaign and bringing in big name designers.

Analysts are now preparing to cut £40-50m from their forecasts for full-year profits.

Profits decline

SG is predicting full-year profits of £480m before one off items, but is ready to downgrade by 5-10%.

Meanwhile, Goldman Sachs cut its forecast to £473m, ahead of Tuesday's statement.

The consensus view is that M&S full year profits will be £485m.

Last July, M&S reported full-year pre-tax profits of £417.5m, down from £546.1m the year before. Two years ago, it generated £1bn in profits.

The retailer's shares closed down 0.5p on Monday at 200p.

-- Rachel Gibson (rgibson@hotmail.com), January 23, 2001