M&S boss blames poor profits on Christmas retail price war
Marks & Spencer boss Marc Bolland blamed a vicious Christmas price war today as profits came under pressure and sales in the chain's fashion division fell for a 10th successive quarter.
Mr Bolland refused to answer questions over his future amid the continued woes in the company's beleaguered general merchandise (GM) arm, which includes clothing and homewares.
Sales were down 2.1pc for the 13 weeks to December 28 when compared with last year on a like-for-like basis, despite concerted attempts to turn around fortunes with new senior personnel and a major marketing push.
Mr Bolland blamed unseasonably warm weather for a sharp decline in October but said full-price sales were up in November and December. Figures showed an improvement of 0.5pc over the eight weeks to Christmas Eve.
But the company warned that reductions in the run-up to Christmas - including a "Mega Day" with 30pc off clothing lines - would hit profit margins.
Mr Bolland said M&S had been largely holding its nerve on full-price sales but was forced to act as the high street turned "extremely promotional" with an unprecedented scale of offers at an early stage.
"Anyone who was on the high street could see on the 14/15 (of December) weekend, the whole market was already red (with offers signs)."
He added: "I must confess that this was not an easy Christmas."
The chief executive blamed rivals including US and other internationally-owned stores for starting discounting two weeks before December 25 and said Marks's own promotions came later and were more modest.
He added that many consumers had yet "to see and feel the personal benefits" of the headline economic recovery while there was a "sharp difference" in levels of optimism between the south and the rest of Britain.
Mr Bolland brushed off questions about his future, saying: "It is not about my own position. I am here talking about the company performance and the steps taken to improve the business."
He said that while the quarter had been difficult, there were "encouraging signs" including small growth in market share for womenswear.
Marks said it enjoyed a good performance in coats, dresses and footwear, while its spring/summer collection had been well received.
Mr Bolland also hailed a "stellar" performance from the food division, where like-for-like sales rose by 1.6pc - less than the last quarter's 3.2pc but against what he said was a tough comparative period in 2012.
Record daily food sales saw £64 million in groceries go through the check-outs on December 23 and the company said one in four families enjoyed an M&S turkey on Christmas Day.
Meanwhile, total international sales were up 4.5pc for the quarter and Mr Bolland said a 23pc rise in online sales was well ahead of the market.
The figures came as rival fashion retailer New Look posted a 1.5pc like-for-like UK sales rise over the seven weeks to December 28, putting Marks's 0.5pc increase over a similar period in the shade.
New Look, which did not publish full-quarter figures, admitted it also suffered a tough October but its strong full-price performance had protected profit margins - in contrast to its larger rival.
M&S said that for the full year its GM margins would be down by up to 0.5pc, meaning overall margins - lifted by a better food performance - would be flat. It led analysts to cut annual profits forecasts.
The continued struggles in the GM division come more than a year after Mr Bolland began a reshuffle of the brand's key fashion executives.
The changes were expected to bear fruit with the current autumn/winter fashion range, heavily promoted in a marketing campaign featuring stars such as Helen Mirren. But instead, sales declined further than in the previous quarter, when they fell 1.3pc.
Cantor Fitzgerald analyst Freddie George said: "We continue to believe it will take a number of seasons before the existing team is able to manifest a marked improvement in performance in womenswear."
Despite the group's woes, M&S shares - which dropped steeply during December on fears over its Christmas performance - picked up today as traders took the positives from its trading update.
Keith Bowman, equity analyst at stockbrokers Hargreaves Lansdown, said many would be "breathing a sigh of relief" that the figures were not worse.
"For now, investors are still being asked for patience. Signs of a turnaround for its GM business have emerged, whilst the food business continues to take up the slack," he said.
He said rival Next's online business was now "streets ahead" of Marks's web offering but added that Mr Bolland "continues to be given the benefit of the doubt".
Chancellor George Osborne was asked about the disappointing Christmas figures reported by retailers such as M&S, Tesco and Morrisons during a visit to Enfield, north London.
Mr Osborne said: "Some retailers have done better than others and of course some have had a difficult Christmas. Others, like John Lewis and Next, have put in better results.
"What that says to me is it's very competitive out there in retail, and people know that. There's also a big change happening in our country with more people shopping online.
"But I'm the first to say this economic recovery is not yet secure, we have to work through the long-term economic plan that is turning Britain around and we need to make sure that we get balanced growth across the whole country and we get investment and exports alongside consumer spending.
"That's exactly what our economic plan is designed to deliver."