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M&S returns to sales growth; cautious on 2010

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Reuters
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today Jan 6, 2010
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By Mark Potter and James Davey

LONDON (Reuters) - Marks & Spencer Plc posted its first rise in quarterly underlying sales for over two years, joining rivals in reporting solid Christmas sales while also warning of an uncertain outlook for 2010.


Photo: www.marksandspencer.com

The 126-year-old group, which is the country's biggest clothing retailer and also runs an upmarket food business, said on Wednesday 6 January sales at UK stores open at least a year rose 0.8 percent in the 13 weeks to December 26, its fiscal third quarter.

That was below analysts' average forecast of 1.2 percent. However, the group said the figure was nearer 2 percent adjusting for the fact that the comparable period the previous year included an extra day of the post-Christmas clearance sale.

The rise in underlying sales was the first since the second quarter of 2007-2008.

"We had a good Christmas, continuing the improvements seen throughout 2009," said Chairman Stuart Rose, flagging strong sales of knitwear, sleepwear and Christmas treats such as mince pies and champagne.

"We expect the trading conditions over the coming year to remain challenging as a result of continuing economic uncertainty," he added.

The country's retailers have coped better in the recession than many analysts had expected, helped by cost cutting and sharply lower interest rates, which have propped up consumer spending.

But economists warn taxes will have to rise and public spending fall in order to rein in government debt, which could hit confidence among shoppers this year.

Earlier on Wednesday 6 January, a survey showed consumer confidence suffered its sharpest fall in over a year in December, even as other data showed both job placements and wages rising.

UNDERLYING SALES

M&S's mix of solid Christmas trading and caution on 2010 echo recent comments from other major retailers.

Fashion chain Next Plc on Tuesday 5 January raised profit forecasts for the year to January 31, but warned earnings in 2010-2011 could be flat, while department stores group John Lewis forecast a "long slow recovery" even as it posted surging sales.

M&S, which serves 21 million Britons a week from more than 650 stores and also has about 300 shops abroad, said underlying UK sales were up 1.2 percent in general merchandise, which includes clothing and homewares, and up 0.4 percent in food.

International sales were up 6 percent.

The company said its guidance on profit margins, costs and capital spending remained unchanged.

M&S shares, which plunged over 60 percent in value in 2008 as the recession took hold, recovered over half their losses last year as the group stepped up promotions in its food business and introduced new clothes such as the popular Indigo range.

They have beaten the DJ Stoxx European retail index about 40 percent over the past year and closed at 404.9 pence on Tuesday 5 January, valuing M&S at 6.4 billion pounds ($10.2 billion).

(Editing by Hans Peters and David Holmes)

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