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Marks & Spencer blames warm weather for 13th consecutive decline in clothing sales Shares at Marks & Spencer rally on signs of improvements despite 13th consecutive fall in clothes sales
(about 4 hours later)
Marks & Spencer has posted a fall in clothing sales for the 13 consecutive quarter, hit by the warm autumn weather. Marks & Spencer boss Marc Bolland has bought himself more time as the struggling High Street titan begins showing signs of improvement in its much-maligned womenswear division.
The retail giant posted a 2.9 per cent slump in general merchandise sales at stores open longer than a year with clothing sales down 2.2 per cent in the first half. The shares soared nearly 8 per cent, despite the retailer recording a 13th consecutive quarterly fall in sales at its general merchandise business, which includes clothing, as investors appeared impressed with profits remaining steady and costs tightening.
M&S said the “unseasonal weather resulting in high levels of promotional activity across the market” had hit performance. Bolland revealed that, during the five months to the end of August, sales in its under-pressure womenswear division rose 1.3 per cent.
Under pressure chief executive Marc Bolland will hope a 1.3 per cent increase in womenswear sales in the first five months of the year will ease some of the criticism of his strategy to fight rivals. However, the Indian summer, which saw one of the hottest and driest Septembers on record, meant general merchandise fell 4 per cent on a like-for-like basis for the three months to the end of that month. It was down 2.9 per cent over the six months.
M&S has losing out to rivals including rapidly growing discount fashion retailer Primark in the battle for clothing spend. Next revealed last week that the warm autumn weather had impacted its trading as winter clothing stock remained on the rails. He also warned October was only marginally better, as the warm weather left several lines unsold.
The retailer posted a 2.3 per cent  increase in underlying profit before tax to £268 million. Sales in its online arm fell 6.3 per cent but M&S said it would be back in growth ahead of its peak trading period over Christmas. Gross margins, the difference between the wholesale and retail prices, in general merchandise improved by 150 basis points over the first half, and Bolland also raised its non-food gross-margin forecast for the full-year to growth of between 150 and 200 basis points, up from 100 basis points.
Total first half like-for-like sales fell 0.7 per cent, helped by a 1 per cent increase in sales in its food arm which has consistently outgunned its general merchandise business for the last two years. Half-year pre-tax profits fell 0.4 per cent to £279.4 million, which was one of the smallest profit drops since Bolland’s tenure, while underlying profits jumped 2.3 per cent to £267.6 million, better than City analysts were expecting.
“M&S delivered sales growth and increased profit in the first half despite a tough market, particularly in September. There was also a hike in the interim dividend, which rises 0.2p to 6.4p, as investors pushed the shares up 31.5p to 436.2p.
“We are pleased with the progress we have made against our key priorities for the year: general merchandise gross margin, improving womenswear, driving food growth and cash generation.”  Bolland said the boost in profits was mainly down to cost cutting in its supply chain.
M&S’s discount policy has come under attack, with customers becoming frustrated after buying garments at full price only to see it discounted a few weeks later.
Last Christmas loyal customers complained when he launched a 20 per cent off everything sale weeks before Christmas Day. Bolland refused to rule out a similar sale this year and said any promotions would depend on “remaining competitive”.
He added: “There are some things you cannot completely plan for. We have slightly higher stock but we will be able to trade it well this week as we see the weather changing.”
However, there were also troubling signs on the website, which saw sales down 6.3 per cent after a £150 million overhaul led to its entire customer base being forced to re-register.
Bolland predicted website sales would return to growth in the next few weeks and said customer complaints about how complicated the website had become were being addressed.