M&S enjoys sales boost but retailer wary of storm ahead

MARKS & SPENCER said it has made a good start to the financial year, reporting its third consecutive rise in quarterly sales but it warned about the outlook for consumer spending.

New chief executive Marc Bolland, who jumped ship from Bradford-based Morrisons, said that the effects of the Emergency and upcoming October Budgets will hit certain areas of consuming spending.

"All the indications are that it is going to be tougher in the coming nine months," said Mr Bolland. "The impact will be strong, we have to factor it in."

Hide Ad
Hide Ad

Retailers are worried that higher taxes, including a rise in VAT to 20 per cent next January, and public spending cuts aimed at slashing record Government borrowing will hit consumer spending in the months ahead.

"This Budget will have an impact on trading not only for us, but for the high street in total," said Mr Bolland.

M&S, the UK's biggest clothing retailer, said like-for-like UK sales rose 3.6 per cent in the 13 weeks to July 3, its first quarter.

That was toward the top end of analysts' forecasts and was boosted by a strong performance in clothing.

Hide Ad
Hide Ad

"Womenswear, lingerie, menswear and kidswear are all up," said Mr Bolland. "We have seen very consistent growth."

Debenhams said last week that trading had got tougher since the Emergency Budget with consumers also distracted by the World Cup.

M&S was hit hard in the recession, particularly in its upmarket food business.

It has fought back with lower-priced 'Wise Buys' in food, new clothing ranges like 'Indigo', and a revamped online offer.

Hide Ad
Hide Ad

Like-for-like UK general merchandise sales, which include clothing and homewares, rose six per cent in the quarter, boosted by strong sales of summer knitwear and holiday ranges.

Mr Bolland said M&S would be happy to tie up with the England football team again despite its disappointing performance at the World Cup.

"Yes, we would do the World Cup suit again," he said. "It's a very bad gesture to say we would not be with them during the bad times."

He added that the grey suit, worn by the England 23-man squad and manager Fabio Capello, had proved very successful and the group had sold 5,000 of them.

Hide Ad
Hide Ad

Analysts said Mr Bolland has a tough task ahead of him. He is due to announce his plans at the group's interims in November.

"The good news is that the business has sales momentum and is winning market share," said Greg Lawless, analyst at Collins Stewart. "But there are some big strategic decisions that need to be taken, including infrastructure, Simply Food stores, property portfolio and international expansion."

Food sales rose 1.5 per cent on the same basis, helped by 570 new product launches, including the 'Grill' meat range.

That excluded a benefit from Easter, which would have added about 0.4 per cent to general merchandise and 1.4 per cent to food sales.

Hide Ad
Hide Ad

The group said it was pleased by the performance of branded good such as Marmite and Heinz Tomato Ketchup, which were introduced for the first time last year in response to customer demand.

"We are seeing double digit like-for-like growth in brands in stores that have stocked them for over a year," said Mr Bolland.

Chairman Stuart Rose played down the prospect of a shareholder rebellion at its annual meeting next Wednesday over the 15m pay package awarded to new chief executive Marc Bolland, saying he had confidence all resolutions would be passed.

He argued that 87 per cent of Mr Bolland's package is dependent on the company hitting tough targets.

Bolland laughs off Sir Ken's criticism

Hide Ad
Hide Ad

Marc Bolland, former chief executive of Morrisons, yesterday laughed off criticism directed at him from former Morrisons' chairman Sir Ken Morrison.

Sir Ken attacked Mr Bolland at the group's AGM last month after the latter quit Morrisons to take on the top job at Marks & Spencer. The supermarket tycoon said he was "not too disappointed" about the departure of Mr Bolland, who was "patently not a retailer".

Mr Bolland joined Morrisons in 2006 from Heineken, two years after the supermarket chain's takeover of Safeway. Sir Ken said the people who did the hard work making a success of the integration were overlooked and "never got the credit for it".

When asked about Sir Ken's criticism yesterday, Mr Bolland laughed it off, saying: "I took it with a big smile. Sir Ken has been very complimentary to me. He said I did a sterling job."

Hide Ad
Hide Ad

Mr Bolland, who is highly regarded in the retail industry, announced that he was leaving Morrisons to join M&S last November.

On the day his departure was announced, Morrisons' shares fell by five per cent and M&S shares rose six per cent.

Related topics: