Marks & Spencer’s food business appears to have outperformed rivals in the supermarket sector over the festive period, although the group’s share price took a battering this morning after results showed it had failed to build on recent signs of a recovery in its clothing business.
Overall group like-for-like sales in the UK rose 0.2% in the 13 weeks to 28 December, pushing the company into growth for the first quarter in three years.
The performance was driven by its Food business, which is undergoing a major overhaul to improve its product offering and price competitiveness in order to appeal to a wider audience as it prepares to launch a grocery delivery offer with Ocado.
Food like-for-like sales were up 1.4% over the period, significantly better than recent figures released by the likes of Sainsbury’s, Tesco and Waitrose. The group stated that it had seen further improvement in volumes, with “standout performance” in the two-week Christmas period as customers responded to its lower pricing and product innovation. However, M&S admitted that it had bought too much stock of certain lines, leading to increased discounting and food waste.
Like-for-like sales in the clothing and home business fell 1.7% – an improvement on the 2.4% fall in the same period last year, but worse than City analysts were expecting.
The division’s online revenue rose 1.5% – a smaller-than-expected increase as the retailer was hit by “competitor discounting” during December and lower furniture dispatches at the start of the period.
Steve Rowe, Chief Executive said that while performance improved across its two main businesses, “disappointing one-off issues – notably waste and supply chain in the Food business, the shape of buy in Menswear and performance in our Gifting categories – held us back from delivering a stronger result”.
However, he added: “The changes we made earlier in the year in Clothing have arrested the worst of the issues of the first six months and we are progressively building a much stronger team for the future.”
Commenting of the results, Richard Lim, Chief Executive of consultancy Retail Economics, said: “Food performed particularly well, benefiting from stronger underlying household finances, but consumers also responded positively to more competitive pricing.
“It appeared that shoppers were prepared to indulge that little bit more this Christmas on food if they spotted value for money.”
He added: “While clothing and home lagged overall growth, it still improved on previous performances. The major disappointment came in the online business that barely showed any meaningful signs of growth.
“Integrating a seamless digital proposition remains the key challenge for the retailer.”
NAM Implications:
- Time to reconsider split of food and non food.
- Otherwise analysts will discount the performance/value of the Food division…
- …and NAMs could do likewise…
