Shares in high street retailer Marks & Spencer (MKS) gave up their early gains to trade 2% lower at 138.6p after the firm posted a fall in third quarter revenues due to government restrictions on store openings.
UK turnover for the three months to 26 December fell 7.6% on a like-for-like basis to £2.53 billion, as a 2.6% rise in food sales was more than offset by a 24.1% decline in clothing and home sales.
The core food business performed strongly, despite reduced food-on-the-move sales due to lower footfall, and the Ocado Retail venture ‘further sustained its recent positive performance’ with sales of M&S goods remaining ‘strong’, although the firm provided no detail.
Clothing and home sales were heavily affected by the restrictions, with in-store revenues down by 46.5% and online sales up 47.5% resulting in an overall drop of 25.1%. However, the market was expecting a fall of closer to 30%.
Also, the headline figures masked the firm’s progress in repositioning its ranges, with strong sales of pandemic-influenced products like sleepwear and leisurewear, along with an improvement in full-price sales.
International sales were down 10.4% to £239 million as the firm struggled to get the right products to its franchise partners although the same positive trends were seen in online shopping.
Chief executive Steve Rowe was upbeat despite the challenges facing the business: ‘Given the on-off restrictions and distortions in demand patterns our trading was robust over the Christmas period. More importantly, beneath the Covid clouds we saw a very strong performance from the food business including Ocado Retail, and a further acceleration of clothing & home online.’
The latest government lockdown will inevitably impact fourth quarter trading, and the firm is still working through the increased red tape and tariffs resulting from the UK’s exit from the European Union.
However, its food offering is clearly popular and it continues to actively manage its clothing and home stock together with its overall cost base.
Shore Capital, house broker to M&S, said: ‘M&S has not stopped transforming, and a fully-fledged management team is doing so at pace, which to us augurs well for FY2022 when positive operational gearing on a restructured organisation should feed EBITDA, reduce debt and help drive the group to investment grade status. Hence, in a frustrating time there is perhaps brighter light around M&S than there has been for some considerable time.’
