Marks and Spencers sales hit by summer deluge
BELLWEATHER British retailer Marks & Spencer posted its worst underlying quarterly sales performance for three and a half years after the wettest April and June since records began hammered trade in womenswear.
The firm, which sells clothes, footwear and homewares as well as upmarket foods, also said on Tuesday that the head of its non-food business Kate Bostock would leave the business, adding her name to a list of significant top management departures this year.
Marks & Spencer (M&S) said sales at UK stores open more than a year fell 2.8 percent in the 13 weeks to June 30, its fiscal first quarter, in the firm's worst quarterly drop in sales since the third quarter of the 2008/09 financial year.
"General merchandise underperformed in a difficult trading season. We are confident we are taking the necessary steps to address this," said Chief Executive Marc Bolland.
The outcome compared with analysts' consensus forecast of a fall of 3 percent, according to a company poll of 12, and a decline of 0.7 percent in the fourth quarter of the previous year when the retailer erred by running out of best-selling women's knitwear and footwear lines.
M&S' like-for-like general merchandise sales, spanning clothing, footwear and homewares, fell 6.8 percent compared with analysts' consensus forecast of down 6.7 percent.
Food sales on the same basis rose 0.6 percent versus analysts' consensus forecast of a rise of 0.8 percent.
While wet weather clearly paid a part in M&S's poor general merchandise performance analysts point out that rivals John Lewis and Debenhams continue to post sales growth, indicating the firm may have made more mistakes.
Bostock will leave M&S in October. Her job will be taken by John Dixon, the current boss of food.
"John has done an outstanding job in running the food division over the past 4 years," said Bolland.
"He has delivered consistent growth through meeting our customer's desire for quality and innovation. He is the right person to take over the running of our General Merchandise division."
M&S' gloomy update, published ahead of its annual shareholder meeting, will increase the pressure on Bolland, who in May reduced the retailer's sales forecast for its three-year growth drive.
Since then analysts have been edging down profit forecasts for M&S's year to end-March 2013 to about 680 million pounds.
The group serves about 21 million Britons a week from more than 730 stores, and its downbeat trading statement is bad news for an economy that tipped back into recession in the first quarter and is heavily reliant on consumers to drive growth.
Overnight the British Retail Consortium (BRC) said UK retail sales rose at their fastest annual pace since December during June, though the outcome was boosted by the Jubilee holiday.
Many British retailers are still struggling as consumers hold back spending in the face of inflation, meagre wage increases and government austerity measures designed to cut record national debt. Confidence has been further undermined by worries over job security, a shaky housing market and the euro zone debt crisis.
Britain's awful summer weather has exacerbated the situation for store groups, with many forced to discount products earlier than last year.
The start to July has been very wet and Britain's Met Office is not forecasting any let up in the rain any time soon.
Shares in M&S, down 14 percent over the last three months, closed Monday at 318 pence, valuing the business at 5.11 billion pounds.