Marks & Spencer. Picture: REUTERS
Marks & Spencer. Picture: REUTERS

London — Sales at Marks & Spencer (M&S) fell in the first half, with both clothing and food hit by disruption from the British retailer’s latest attempt at a turnaround.

After more than a decade of failed re-inventions, M&S is now targeting sustainable, profitable growth in three to five years and warned on Tuesday that sales are unlikely to improve soon.

“Trading conditions remain challenging and the headwinds from the growth of online competition and the march of the discounters remain strong in all our markets,” it said.

Shares in M&S, which have fallen 4% so far this year, were down 1.1% at 8.06am GMT.

M&S said that its full-year outlook is broadly unchanged as underlying profit rose 2%. It also maintained its interim dividend after reporting pre-tax profit before once-off items of £223.5m  in the six months to September 29, ahead of analysts’ average forecast of £203m.

But M&S sales slipped again, with clothing and home down 1.1% on a like-for-like basis and its gross margin down 20 basis points.

M&S is dealing with the migration of clothing and home sales from stores to online along with unrelenting competition from supermarkets and discounters, fashion chains such as Primark, Zara and H&M, as well as pure online players such as Amazon and ASOS.

Pressure on consumer spending, a shift in expenditure towards experiences and away from clothing, as well as unhelpful weather trends has also hampered efforts to revive its business.

Like-for-like sales of food were down 2.9% — worse than analysts’ expectations of a 2% fall. M&S said this reflects tough trading conditions, along with price cuts. Gross margin in the food division fell 25 basis points.

M&S launched its latest turnaround plan in November last year, two months after retail veteran Archie Norman joined as chair. The five-year programme of store closures and relocations  aims to cut excess selling space in its clothing business; increased technology investment aims to make its misfiring food business more competitive.

M&S is targeting 100 British store closures by 2022, as it strives to make at least a third of clothing and home sales online. It has said it could close even more as it manages its property estate more proactively. 

Reuters

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