A fresh decline in clothing sales piled more pressure on Marks & Spencer boss Marc Bolland today after a Christmas beset by online delivery problems.
The retailer’s general merchandise arm, including homewares and fashion, saw a bigger-than-expected decline in like-for-like sales of 5.8% in the 13 weeks to December 27 – the 14th consecutive quarter the figure has fallen.
Shares slumped by more than 4% as the update added to signs that investor patience is being tested by the pace of the company’s turnaround.
Mr Bolland admitted that the quarter had been a difficult one in general merchandise due to an “unsatisfactory performance” in M&S’s e-commerce distribution centre and unseasonal weather conditions.
M&S said its website performed well operationally but this was offset by disruption at its new distribution centre in Castle Donington, Leicestershire.
Customers complained that they were not able to make in-store click-and-collect orders for the next day, while deliveries to home addresses, which normally take three to five days, were taking up to 10 days.
M&S said it had made progress in addressing the issues, which were fuelled by Black Friday demand, and that its delivery service was now back to normal.
Trading in October and November was also affected by unseasonal weather conditions which M&S said impacted sales across the clothing sector and resulted in a highly promotional market.
The company added: “We deliberately held back the level of discounting especially in December. While this had an adverse impact on sales we delivered a good performance on gross margin.”
The performance in general merchandise is in contrast to John Lewis, which recorded 4.8% like-for-like sales growth for the five weeks to December 27, whilst Next saw better than previously feared total sales growth of 2.9%.
Mr Bolland has come under increasing pressure in the last year as the retailer’s performance has stuttered despite turnaround efforts including a £2.3 billion investment drive over the last three years, the hiring of new fashion executives and a celebrity-driven marketing push.
Annual profits have fallen for three years in a row and were recently overtaken by rival Next, although M&S is on course to improve profits in the 2014/15 financial year from the £623 million seen in 2013/14.
Shore Capital analyst Clive Black said: “We can see how investors will be both annoyed and nervous that a more satisfactory out-turn has not yet been delivered and for demonstrable measures to have been put into place which provide confidence in the group’s ability to engineer an improvement.”
However, he highlighted signs of encouragement in womenswear and ongoing success in food after like-for-like sales rose 0.1% in the quarter.
Neil Saunders, managing director of retail analyst Conlumino, added: “We believe that M&S’s strategy of becoming more fashion-focused is generally sound.
“New collections, including those in place over the Christmas period, had some strong pieces and, generally, looked good – especially in larger stores.
“However, it is fair to say that the rejuvenation of M&S’s clothing offer is at a relatively early stage and it has not yet completely won back the confidence of consumers. This means that performance can easily be blown off course by negative headwinds, and the gusts certainly blew this Christmas.”