Discounting dulls the ‘sparkle’ from M&S Xmas clothing sales
Marks & Spencer’s clothing sales marked a tenth consecutive quarter of decline as deep discounting hit margins but a strong performance from its food business in the important Christmas period, which was backed by a high profile marketing campaign starring model Rosie Huntington-Whiteley, prevented the retailer issuing a profit warning.
Total UK sales fell 0.2 per cent in the 3 months to 28 December.
The retailer said like-for-like sales of general merchandise – which includes clothing, footwear and homewear – fell 2.1 per cent in the quarter. Analysts had forecast non-food sales would fall about 1.4 per cent.
Marks & Spencer said the period was a “challenging quarter” for the general merchandise market, with “unseasonal conditions” and “higher than ever levels of discounting”.
The retailer said it held its full-price trading stance for much of the quarter but as the level of promotional activity intensified in the run up to Christmas, it responded with a number of promotions. However, elsewhere rival retailers including Next and John Lewis have been hailed as “festive winners” as their gambles to resist the temptation to discount over the festive period paid off.
As a result of Marks & Spencer’s investment in promotional activity it now expects its gross margin in the general merchandise division to be down 30 to 50 basis points, meaning its margin will be broadly the same as last year.
Marks & Spencer says it did see early signs of improvement in its womenswear business. The autumn/winter clothing collection was relaunched in August and accompanied by a high profile “Leading Ladies” marketing campaign, featuring British women including Olympic gold medalist Nicola Adams and Dame Helen Mirren.
The retailer says its re-focus on the quality and style of the range helped it mark “small market share growth” in womenswear for the first time in three years, according to Kantar figures for the 12 weeks to 24 November.
Marks & Spencer’s food business remained its strongest performing division, with like-for-like sales up 1.6%. The retailer ran a high-profile marketing campaign over Christmas that had a strong focus on food and starred celebrities including Helena Bonham-Carter and Rosie Huntington-Whiteley. It carried the strapline “Believe in magic and sparkle”.
Marks & Spencer marked its “biggest ever day” for food on 23 December, with tills ringing in £64m on that day – up 17 per cent on its previous record in 2011.
The retailer also credited M&S.com for delivering a strong performance in the quarter, with total sales up 23 per cent over the eight week Christmas trading period. It said this was driven by consumers increasingly turning to mobile, with orders from tablets up 100 per cent and from smartphones up 80%, improving both traffic and conversion rates.
James McGregor, director of retail consultants at Retail Remedy, says Marks & Spencer’s third quarter “remains a story of two halves”, with the problems of its non-food division accentuated by the fact that food is consistently delivering increased footfall into stores.
He adds: “Despite the Christmas marketing campaign positively targeting a wider age group, the business is still failing to appeal to its desired customers in store.
“The customers M&S wants to attract are more attuned to the aesthetics and ambience of Next, House of Fraser and ZARA, not the lifeless, confusing and commodity-driven racks still found within the majority of M&S stores.
“M&S’s problem is that there’s always a danger of turning up to your grandmother’s 80th to find you are both wearing the same M&S dress.”
Marks & Spencer’s share price was down 0.2% to 444.01p at the time of writing.