M&S sees best quarter in years

British retailer Marks & Spencer posted its best quarterly non-food sales performance in four years, yesterday, putting behind it the online distribution problems that ruined its Christmas and buying its chief executive more time to secure a recovery.

Shares in Britain’s biggest clothing retailer rose as much as 6.3%, to a seven-year high after it said sales of general merchandise – spanning clothing, footwear and homewares – rose 0.7% in the past quarter at stores open more than a year.

CEO Marc Bolland highlighted “high single-digit” like-for-like sales growth at both its relatively upmarket Autograph and Limited clothing brands, and noted positive press reviews of a £199 (€270) suede skirt that will hit stores this month and is attracting high levels of pre-registration.

The outcome was the first time in 15 quarters M&S has not posted a fall in non-food like-for-like sales and was also better than analysts’ average forecast of down 1.2%.

It followed a third-quarter slump of 5.8%, reflecting unseasonal weather in October and November and disruption at its e-commerce distribution centre at Castle Donington in central England.

Mr Bolland, CEO since 2010, has spent billions of pounds addressing decades of under-investment at M&S, overseeing a redesign of products, stores, logistics and its website. But a new clothing team he set up in 2012 has so far failed to deliver a sustained increase in sales. When products have proven a hit, it has often struggled to replenish supplies fast enough before shopper interest subsided. However, a food business outperforming the wider grocery market and improving profit margins – both in non-food and food – have kept investors onside, with M&S shares rising 44% over the last six months.

“It’s a step-by-step journey and we’re taking steps in the right direction,” Mr Bolland told reporters.

Online sales returned to growth in the quarter with sales up 13.8%, while Castle Donington was said to have performed well. Like-for-like sales in M&S’s food business rose 0.7% in the 13 weeks to March 28, its fiscal fourth quarter, a 22nd straight quarterly rise.

Full-year gross margin guidance for food was up 10 to 30 basis points. However, M&S said macro-economic issues in Russia, Ukraine and Turkey, coupled with a weakening in the euro, had dented second-half profit in its international division, where fourth-quarter sales fell 3.8%.