Customers are wanting quality again, says M&S

The retailer managed to overcome the problems caused by the snow, which cost the group around 50m-55m in lost sales, to report a 2.8 per cent increase in like-for-like UK sales during the 13 weeks to January 1.

Of this general merchandise sales, which include clothing and homewares, rose 3.8 per cent and food was up 1.8 per cent.

On Monday, Bradford-based Morrisons said its like-for-like sales rose 1.0 per cent in the six weeks to January 2.

Marks & Spencer's new chief executive Marc Bolland, the former Morrisons' boss, said customers are returning to quality both in food and general merchandise.

"We are leading the gain in quality," said Mr Bolland. "Consumers said our quality has improved. We sold 1.9 million turkeys, up 10 per cent, and our turkeys are the highest quality in the market."

Luxury goods performed very well, with champagne sales up 10 per cent, salmon and prawns both up 17 per cent and party food up 18 per cent.

In clothing, the group sold 600,000 cashmere items, an increase of 11 per cent.

However, the group sounded a note of caution over the coming months as household budgets get squeezed by tax increases and public sector spending cuts, which come on top of an increase in the price of commodities such as cotton.

"We expect trading conditions ahead to be more challenging as consumers' disposable incomes come under pressure from increased VAT rates and the impact of public spending cuts," said Mr Bolland. "The outlook for this year is not going to make customers' lives much easier."

M&S, which is the UK's leading clothes retailer, estimated the bad weather cut sales of general merchandise by three per cent and food sales by one per cent.

But general merchandise sales were lifted three per cent higher by the inclusion of more days in the post-Christmas clearance sale than the same time last year.

The like-for-like sales increase represents the fifth straight quarterly rise, but was down from the 5.3 per cent increase seen in the second quarter.

Asked whether the group has seen a North/South divide as the North takes the brunt of the public sector job cuts, Mr Bolland said there was nothing to report as yet.

"London is not immune," he said. "We're not reporting on differences in the regions, but we're following it closely."

He added that the group's Scottish stores had seen more of an impact from the snow than its Southern stores.

The group's shares closed down 2.8 per cent last night, a fall of 10.8p to 373.2p.

The shares have slipped five per cent over the past three months, compared with a three per cent rise in the UK general retail index following a lukewarm reception to a big investment drive announced by Mr Bolland in November.

But yesterday analysts came out in favour of his plans.

Philip Dorgan, at Altium Securities, said of the Christmas trading statement: "These numbers show that M&S can cope extremely well with difficult trading conditions and we believe that the current share price is underestimating the long term potential to cross-sell, extend the brand and to expand overseas.

"We like the new chief executive's plan – even if the market doesn't – but it is clearly all about implementation, as ever."

Freddie George, retail analyst at Seymour Pierce, said the trading statement was better than expected with the company saying its profits guidance for the year remains unchanged.

"Marc Bolland's proposed shake-up of the company has not been a 'damp squib'," he said. "We reiterate our buy recommendation and believe that the Bolland strategy will lead to further upside to earnings toward the 1bn level over the next three years."

M&S said it had recorded its biggest ever day in food sales, achieving a record of more than 50m on December 23.

The results come amid a mixed run for UK retailers, after HMV, Next and Debenhams all posted a slump in sales over the Christmas period.

M&S enjoyed a good run in 2010, with like-for-like sales consistently beating expectations and profits in the first half of the financial year up 17 per cent at 348.6m.

Yesterday's figures reflected Mr Bolland's first Christmas with the company, and the first trading update since he unveiled his three-year plan.

The retailer increased its market share in food to 3.9 per cent during the 12 weeks to November 28, according to researcher Kantar, as the firm launched more than 600 new products during the quarter.

M&S Food was promoted in a series of new ads over the festive season starring actress Caroline Quentin, who is seen hosting a Christmas party.

From market stall origins...

Marks & Spencer dates back to 1894 when pedlar Michael Marks set up a market stall in Leeds. Tom Spencer invested 300 to join him in the business.

Mr Marks focused on customers and sales while Mr Spencer's skills lay in administration and accounts.

M&S is now one of the UK's leading retailers with over 21 million customers a week.

It employs over 75,000 people in the UK and abroad and has over 600 UK stores.

It is the number one provider of womenswear and lingerie in the UK.

Clothing and homeware sales account for 49 per cent of the business. The other 51 per cent is in food where it sells fresh produce, groceries, partly-prepared meals and ready meals.