Late share rally gives hint of recovery at M&S

The retailer’s shares rose 4.5 per cent, a rise of 22p to 509p, despite the group reporting its ninth quarterly fall in clothing and homeware sales.

M&S’s chief executive Marc Bolland, who has built his recovery plan around higher quality and more stylish fashions, said the new autumn/winter ranges are starting to have a positive impact just weeks after being fully introduced.

Fashion critics have given the new ranges their seal of approval and they are seen as meeting customer demand for fashion and quality, but analysts said it was too early to say if they will pull M&S out of the fashion doldrums.

Analyst Sam Hart, at Charles Stanley, said: “ The much publicised relaunch of womenswear ranges was only fully completed a couple of weeks before the end of the period, so it remains too early to judge whether this has been successful.”

Mr Bolland, who left Bradford-based Morrisons to join the UK’s biggest clothing retailer in 2010 with a package worth up to £15m, said he couldn’t say if underlying clothing sales will return to growth in the all-important Christmas trading season. Comparative figures last year were weak.

“We’re looking at a gradual improvement. We haven’t given ourselves a timeline,” he said.

Like-for-like general merchandise sales, which include clothing, homeware, footwear and accessories, fell 1.3 per cent between July and September on a year earlier.

The sales decline was slightly better than City hopes and was an improvement on the 1.6 per cent first-quarter drop.

Pre-tax profits fell 8.9 per cent to £261.6m during the 26 weeks to the end of September.

All eyes are now on its pivotal October to December quarter, with M&S due to air its first Christmas advert on TV screens tonight during the Coronation Street ad break.

M&S launched its Leading Ladies advertising campaign, featuring a dozen high-profile women including actress Dame Helen Mirren and Leeds-born Olympic boxer Nicola Adams, on September 12, although some items arrived in stores in July.

The ranges are the brainchild of a new clothing team led by John Dixon, the former boss of M&S food.

The new stock was coupled with the roll-out of a more “inspiring” store layout.

M&S blamed “unseasonable” conditions, including a mild September, which it said led to heavier discounting by rivals.

It was forced into aggressive discounting to shift old stock ahead of the new range, and also started its traditional mid-season sale earlier, eroding margins.

M&S said that while consumer confidence appears to be improving, there is little evidence of this translating into higher spending, adding that it is cautious on the outlook for the rest of the year.

It is targeting a steady improvement in its clothing performance.

“This is a journey,” said Mr Bolland. “We’ve been clear that people should look at it from season to season. What we like to see is a gradual improvement. Our shareholders are very clear on that as well. It will take a few collections to get a positive momentum behind it.”

The items featured in its latest adverts are now 80 per cent sold out.

“Although only in store for three weeks of the half year, our autumn/winter collection has been well received by customers, and we have seen some early signs of improvement,” said Mr Bolland, who is in the final year of a £2.3bn, three-year investment drive to revamp the 129-year-old group.

Despite the rise in share price, some analysts said that M&S will need a strong Christmas to hit full-year profit forecasts.

James McGregor, director of retail consultants Retail Remedy, said: “The walls are closing in on Marc Bolland.” But N+1 Singer analysts said there is a precedent for new ranges turning round M&S’s performance.

This happened in Autumn 2005 when its stock rallied over 40 per cent in six months following a step-change under chief executive Stuart Rose.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “The much publicised launch of the new clothing range is showing early signs of promise, whilst the level of sales decline seems to be softening.”

M&S said its overall expectations for the 2013-14 year are unchanged after first-half underlying pre-tax profits fell to £261.6m.

The food business, which contributes over half of group sales, reported a 3.2 per cent increase in second-quarter like-for-like sales.

This was the division’s eighteenth straight quarter of growth, boosted by 160 new product lines.

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