M&S offered discounts of up to 50 per cent off beauty and gift lines, as well as 30 per cent reductions on clothing such as knitwear, usually a big seller at Christmas. Oriel Securities analyst Jonathan Pritchard forecasts that sales at its general merchandise division, which includes clothing and homeware, fell by 1.4 per cent.
That is down on the 0.5 per cent decline forecast by analysts last month. There are also concerns among analysts that the level of discounting will have hit profit margins
The expected sales drop comes despite the relaunch of its womenswear range, which focused on quality and was meant to turn around its performance after two years of disappointing sales. The retailer also ran a high-profile marketing campaign over Christmas that used celebrities including Helena Bonham-Carter and Rosie Huntington-Whitely and the strapline “Believe in magic and sparkle”.
The forecast suggests M&S could be one of the high street losers this Christmas, with retailers so far unveiling mixed results. John Lewis, House of Fraser and Next have all reported healthy festive numbers, but Debenhams issued a profit warning last week, blaming “unprecedented” promotional activity.
M&S is due to announce its results on Thursday (9 January).
Analysts say the decision by retailers such as Next not to discount in the run-up to Christmas paid off, while John Lewis’ managing director Andy Street is trumpeting its decision to hold off on its sale until 27 December with helping maintain sales and profit margins.
However, there are concerns that others on the high street will have struggled after a number of retailers cut prices more deeply and earlier to boost sales at the expense of profit margins. Figures from accountancy firm BDO’s high street sales tracker suggest that sales at physical stores owned by medium-sized retailers such as French Connection, Gap and Hobbs were down 2.2 per cent in December compared to the previous year.
Fashion retailers suffered the most, with underlying sales down 4.6 per cent, a decline that BDO blames on widespread discounting and unfavourable weather. However, online sales were up 31 per cent, with firms such as Next crediting a strong multi-channel service for better-than-expected sales figures.
Don Williams, national head of retail and wholesale at BDO, says: “As anticipated, online sales and click and collect were the real success stories this Christmas and these figures illustrate just how critical it is for retailers to invest in online routes to market. Many retailers will feel disappointed with reduced footfall in stores but when the technology is right this shows that this need not be a disaster.”