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M&S blames VAT hike for sales slump

Marks & Spencer boss Marc Bolland has told investors that the recent VAT hike has hit sales in its Irish operations "hard".

"Ireland went back in the quarter," Mr Bolland told investors on a conference call last week, after the British retailer reported that its overall group sales had missed analysts' forecasts. Like-for-like sales dropped 0.7 per cent in the three months to March, despite the market expecting a 0.2 per cent increase.

Supply issues meant that it didn't have enough stock to meet demand, with Mr Bolland suggesting that it could have sold twice as many women's high-heeled shoes or another 300,000 cardigans or jumpers if it had had enough in stock.

Mr Bolland also gave an insight into the performance of the Irish market, where the company has 21 stores.

"What happened in Ireland is that at the beginning of the year, there was a quite a significant change in the VAT regime in Ireland and Irish consumers' sentiments did take a turn for the worse. Prior to that, Ireland had shown probably three or four months of certainly flat if not a mild recovery. But in the first part of the year consumer trends, at least in Ireland, took a turn down," said M&S finance chief Alan Stewart.

However, Mr Bolland suggested that the VAT impact on sales may diminish over time. "The hope is that when you see these VAT impacts, what we've seen here in the UK and in other places is that VAT impacts are there for two or three quarters. But after that, it becomes part of usual business. But the impact is hard, is very strongly felt in this quarter," he said.

It is extremely unusual to get under the hood of major UK retailers to find out the scale of their Irish operations. However, last week, Marks & Spencer revealed that its operations in Ireland account for "about a third" of its entire international business.

Sunday Indo Business