Analysts forecast another sales drop for M&S

M&S, which attracts 21 million customers a week to its over 700 British stores, is forecast to report a 4-6 per cent drop in underlying sales of general merchandise, spanning clothing, footwear and homewares, in its fiscal fourth quarter to March 30.

The forecast from an M&S poll of 11 analysts is further evidence of the company’s faltering turnaround effort that investors feel has left it vulnerable to takeover speculation.

The expected sales fall follows a 3.8 per cent decline in general merchandise sales in the third quarter when Marks & Spencer moved to protect profit margins by offering fewer discounts at a time when rivals were offering more.

“M&S ladieswear has been haemorrhaging market share for some time now and the Q4 update could make for pretty challenging reading for investors,” said Shore Capital analyst Clive Black.

Chief executive Marc Bolland is in the last year of a three-year plan to make M&S, which was established in Leeds, an international, multi-channel retailer that connects with customers through stores, the internet and mobile phones.

The company is spending £2.4bn over three years on store revamps, logistics, IT and systems, as well as selective investment overseas.

Investors have been sceptical, however, piling into the stock last month after a newspaper reported that the Gulf state of Qatar was planning a bid and sending M&S shares to a 28-month high.

A source close to state-owned Qatar Holding denied the report, but speculation of possible private equity interest has persisted.

Mr Bolland may partly attribute the fourth quarter outcome to unhelpful weather for selling spring/summer goods, including Britain’s coldest March since 1962.

UK rivals have also felt the chill from the weather and economic recession. Next reported slow trading since the beginning of February, while department store Debenhams issued a profit warning, blaming January snow.

Mr Bolland, former chief executive of Bradford-based Morrisons, said in January M&S’s general merchandise performance was “not yet satisfactory” but was confident steps being taken by a new team, led by former food boss John Dixon, would address this.

He has, however, cautioned the new team would not make a major impact on sales until M&S launches autumn/winter collections in July.

M&S’s food operation is performing better, with analysts forecasting fourth-quarter like-for-like sales up 1.9 per cent to 3.5 per cent.