M&S figures may be hit by Irish decline

MARKS & Spencer may have suffered from the Irish downturn in the first quarter of 2003, British analysts speculated yesterday.

Earlier indications from British electrical giant Dixons that its Irish sales were down on a like for like basis has fuelled speculation that the four M&S Irish stores may also have felt the back lash of the sharp decline in the Irish economy.

Marks and Sparks’ Irish operations have been ranked among its most profitable stores, but the group does not break out the Irish figures. It is the largest British clothing retailer, and is expected to report today that sales growth was subdued in its first quarter as consumer spending slowed in Britain.

The London-based company is expected to report an increase of between 2% and 5% in sales at stores open a year or more, with about 2% of the increase due to Easter being a month earlier this year. The sales figures are due today before Marks & Spencer’s annual general meeting.

Summing up the British situation John Baillie, an analyst at SG Securities, said “it’s hard work out there”. He is not expecting fireworks from the group in the short term.

Already the group has indicated less than buoyant sales in the clothing division. In May it said it expected Britain’s clothes market to grow “less than 3%” in the next year, below its prior forecast for a gain of between 3% and 5%.

What we are looking at there is a flagging global economy that prompted the Bank of England last week to cut its benchmark interest rate to the lowest point in almost 50 years.

Clothing sales at Marks & Spencer may have been affected in the early part of the quarter by a period of unseasonably cool weather, analysts said. And in the Irish context the chances of lower sales overall from the Irish operations could not be ruled out.

Precedents exist in Britain for lower sales. Look Group, the second-largest women’s clothing chain, reported declining sales for April and May as the colder than normal climate hampered sales of fashions such as miniskirts.

“Although the weather improved in June, both April and May were poor for clothing retailers,’ said Merrill Lynch & Co analyst Katharine Wynne, who has a ‘sell’ rating on M&S stock. The shares gained 3.5p or 1.1%, to 330p at 8:15am in London and they have risen 4.8% this year, lagging a 19% jump by the 24-member FTSE 350 General Retailers Index. Same-store sales of food, which accounts for more than 40% of overall revenue, may have grown between 3.5% and 4.5% in the quarter.

“Food is really the long-term growth driver of this business,’ said Keith Wills, an analyst at Goldman, Sachs & Co. Overall British analysts are divided in their views on the group that struggled until recently to get its clothing range back in vogue with consumers. Their recommendations range from hold to outperform over coming months. Its Irish operations are not big enough to influence the share rating of the group, analysts said.