CITY investors gave a cautious welcome to news yesterday that Marks & Spencer recorded its strongest growth in two years.
Leeds-born M&S said overall like-for-like sales, excluding changes in store space, were up 0.6 per cent in the 13 weeks to March 30, its fourth financial quarter. Shares closed up XX per cent last night at XXp.
However, M&S posted a seventh straight quarterly fall in underlying sales of clothing and homewares, having to rely on a strong performance from its food business to deliver overall growth.
Marc Bolland, chief executive of the 129-year-old retailer, which has recently been the subject of takeover speculation, is under pressure to revive its clothing performance after a poor 2012 culminated in a disappointing Christmas.
But, he has repeatedly cautioned that a new general merchandise management team led by John Dixon, former boss of food, will not make a major impact on sales until M&S launches its autumn/winter collections in July.
Finance director Alan Stewart said investors knew they had to be patient. “What we’re hearing directly from shareholders is that they are supportive of our strategy... and that they recognise it’s going to take time,” he said yesterday.
“From an executive perspective as well we are absolutely aligned on the strategy, we know what we’re doing and everybody is behind it,” he said. Like-for-like sales of non-food products, spanning clothing, footwear and homewares, at stores open more than a year fell 3.8 per cent in the 13 weeks to March 30.
That was slightly better than analysts’ forecasts of down between four and six per cent, but matched the fall of the previous quarter when M&S moved to protect profit margins by offering fewer discounts. Like-for-like food sales rose four per cent, ahead of analyst forecasts of an increase of 1.9 to 3.5 per cent and a third-quarter rise of 0.3 per cent.
The food division, which had a record Easter week, benefited from innovative products, such as Belgian chocolate mini hot cross buns of which it sold more than 600,000 packs, and from M&S being untainted by the horsemeat scandal that impacted some rivals.
Mr Bolland said M&S was making progress in general merchandise despite tough trading conditions, pointing to improved availability and stock management.
M&S, which serves 21 million customers a week from more than 700 British stores, has strengthened its links with Leeds, its place of origin, in recent times. Last month, it unveiled a new M&S heritage and coffee shop at Kirkgate Market, where it first started as a penny bazaar back in 1884 before the store on Briggate opened in 1908. In 1998, it became the first British retailer to make a pre-tax profit of over £1bn.
The stall, next to the famous M&S clock in the 1904 building of the market, sells special archive items such as mugs and postcards as well as food and coffee. Photographs and imagery from throughout the brand’s 129-year history are also on display.
The stall was launched to mark the first anniversary of the company’s archive at the University of Leeds’ Michael Marks Building, which holds more than 70,000 historic items.
In addition to the Kirkgate Market stall, a new M&S Heritage Trail was also launched with Leeds City Council a month ago. A Marks in Time exhibition has also been set up at the company’s archives.
On yesterday’s update to the stock exchange, James McGregor, director of retail consultants Retail Remedy, said the numbers had bought Mr Bolland a few more months. “Judgement Day for Marc Bolland will come later this year,” he said.
Mr Bolland dismissed speculation regarding his own position, saying: “I’m thoroughly enjoying this job, I’m thoroughly enjoying the challenge.”
Many UK retailers are finding the going tough as consumers, whose spending generates about two-thirds of UK gross domestic product, fret over job security and a squeeze on incomes.
M&S’s update chimed with an industry survey on Tuesday which said growth in underlying UK retail sales slowed last month despite a boost from an early Easter, as cold weather hurt demand for summer clothes and shoes.
M&S stock last month hit a 28-month high after a newspaper reported that the Gulf state of Qatar was planning a bid.
A source close to state-owned Qatar Holding denied the report, but speculation of possible private equity interest has persisted.
“If there would have been anything serious the (Takeover) Panel would have forced either party to come out with statements. “Since you haven’t seen any statements the panel has done its job,” said Mr Bolland.