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M&S reveals worst sales figures for three years

2/10/2008

STRUGGLING retail giant Marks & Spencer today revealed deepening sales gloom with its worst performance for more than three years.
The high street bellwether said UK like-for-like sales fell 6.1 per cent in the 13 weeks to September 27 – its worst quarterly performance since January-April 2005.
Executive chairman Sir Stuart Rose warned: “Consumer confidence remains fragile and the retail environment unpredictable. Consumers are increasingly cautious about their budgets.”
The update reflects a worsening sales picture after M&S caught the City off-guard in July with a 5.3 per cent fall in like-for-like sales during the three months to the end of June.
Today’s figures showed a 5.9 per cent fall in comparative sales for its food business, which has been hit by shoppers deserting to cheaper stores to cut down on soaring food bills.
The fall comes despite promotions such as its ‘Meal for two for £10’ deal aimed at luring back customers. General merchandise – including clothing – saw like-for-like sales fall 6.4 per cent, although Sir Stuart said M&S continued to offer ‘quality, stylish product’ and was confident about its autumn and winter ranges.
The executive chairman, however, warned that the group’s margins would be hit by its price-cutting promotions in the tougher trading environment despite a tight rein on costs.
M&S is also cutting back spending on its shops to £700m this year to save money, compared with the £800m-£900m previously guided.
Most analysts expect M&S to make profits of around £675m this year, down from more than £1bn in the previous financial year.
Sir Stuart said an interest rate cut next week would send a confidence-boosting signal to consumers, but added that the current clouds over the high street could get worse.
“It would be a brave person to say we are at the bottom ... there is a lot of uncertainty about,” he said.
The current financial turmoil added to the difficulties faced by all retailers, he said.
“People are worried about where their money is and the security of their savings, and that is bound to have some spill-over effect into consumer confidence,” Sir Stuart said.
The executive chairman said it was ‘the right thing to do’ to sacrifice some margin within its food business to help out customers, although he remains determined that M&S will not compromise on quality.
“The important thing to get out of this is to say that we are responding to the issues our customers are facing,” he said.

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