Hargreaves Lansdown

Marks & Spencer Group plc (MKS) Ordinary 25p

Sell: 503.00pBuy: 503.50p01.00p (0.20%)
FTSE 1000.21%
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HL comment (8 January 2015)

Third quarter trading update: Marks and Spencer today reported its third quarter results for the 13 weeks to 27 December. UK sales fell by 1.1% in the quarter and like-for-like sales were 2.7% lower, as a strong performance in food was more than offset by further challenges in the General Merchandise division.

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Britain's biggest clothing retailer by revenue said General Merchandise sales (clothing, footwear and homeware) at stores open over a year fell 5.8% in its third quarter, which it blamed in part on unseasonably warm weather in October and November. That represents deterioration on the 2nd quarter performance, where like-for-like sales fell 4% for this division.

General Merchandise performance was also impacted by disruption at the group's distribution centre in Castle Donington in December, which contributed to online sales falling by 5.9% year-on-year. Nevertheless, a slightly better than expected cost performance and lower promotional activity enabled the company to maintain its full year margin guidance.

The food business continued to perform well, with sales up 2.8% in the quarter (+0.1% on a like-for-like basis), as its premium offering continues to set it apart from the big four supermarkets. The company achieved a record performance in the key Christmas week with sales 17% ahead of the prior year.

The International business was heavily impacted by the worsening currency and economic issues across the Middle East and Russia, which contributed to a 5.8% decline in sales for this division.

Commenting on the results, Chief Executive, Marc Bolland, said:

"M&S had a very good Christmas in Food. We delivered record Christmas sales, strongly outperforming the market. We had a difficult quarter in General Merchandise, dominated by unseasonal conditions and an unsatisfactory performance in our e-commerce distribution centre. We maintained our focus on General Merchandise gross margin, with guidance unchanged."

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