Marks & Spencer has released its Xmas trading statement, which shows a continuation of strong trading in the foods business, offset by a weak general merchandise (GM) division. Profits have been protected to some degree by M&S's decision not to join in pre-Xmas discounting to the same extent as rivals, leading to strong gross margins for the period. Cost control has come in ahead of earlier expectations. M&S has also announced that CEO Mark Bolland is to retire after six years, to be replaced by long-serving M&S staffer Steve Rowe, who ran the food business for many years before recently taking over the GM division.
Q3 Sales Performance:
This was the 25th consecutive quarter of LFL sales growth for the Foods business, and included a Xmas week sales performance of +17%, a high bar for the supermarkets to reach when they report.
In the GM division, the weather has been unhelpful and M&S report rivals discounting heavily from Black Friday onwards. M&S acknowledge that whilst they have protected margins, there remains more to be done to address "disappointing GM sales". Availability issues contributed to the weak result, and the new team in charge are focused on this issue, plus ranging and design as their top priorities.
Last year's problems at the Castle Donington distribution centre are behind M&S and the online business is now dispatching record volumes with high customer service levels. The new Sparks loyalty club has signed up 3.3m members in its first eleven weeks.
Internationally, the Middle East was tough for M&S's franchisees, but the company owned stores in countries like India traded strongly.
The combination of better GM gross margins and lower cost growth means that despite the poor sales performance in clothing, M&S is making no change to its profit guidance.
All yield figures are variable and not guaranteed.