Marks & Spencer suffered its biggest fall in quarterly clothing sales since 2005 as a decision by new boss Steve Rowe to cut prices and offer fewer promotions took its toll on the British retailer.
M&S said consumer confidence waned in the run up to Britain’s EU referendum last month but said it was too early to judge the implications of the Brexit vote and stuck to its financial guidance for the 2016-17 year.
“We’re operating in uncertain times, consumer confidence weakened in the run-up to the EU referendum and remains fragile,” chief executive Mr Rowe told reporters, adding he had not noted a further downturn in demand in response to the Brexit vote on June 23.
He has the tough task of reviving a 132-year-old British institution that has fallen out of fashion over the last decade.
M&S shares rose over 1.5% yesterday, but a re a third lower this year, hammered by the May profit warning and fears Britain’s vote to leave the EU could dent consumer demand and increase sourcing costs due to the depreciation of sterling.
Sales from the company’s upmarket food business, its strongest performer in recent years, also went into reverse.
Mr Rowe, a company veteran of 26 years, succeeded Marc Bolland in April and warned the efforts to turn around its clothing business by cutting prices and improving ranges would come at a cost to short-term sales and profit.
“Although these results are on the low side of where I want them to be, they are in line with our plans, it’s what we expected,” he said.
Analysts were harsher in their verdict. “The news is horrible,” said independent retail analyst Nick Bubb.
Analysts at Liberum cut their 2016-17 pre-tax profit forecast by 4.6%.
“It is hard to see that full-year (profit) consensus can do anything other than fall,” they said.
Prior to yesterday’s first quarter statement, analysts’ average forecast for 2016-17 pre-tax profit was £622m (€727m), down from £690m made in 2015-16.
M&S said over the 13 weeks to July 2, its fiscal first quarter, sales of clothing and home products at stores open over a year fell 8.9%.
It was M&S’ worst quarterly performance since the first quarter of its 2005-06 year.
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