Apr 6, 2014
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Another fall in clothing sales to pile pressure on M&S

Apr 6, 2014

London, UK - British retailer Marks & Spencer is set to report an eleventh straight quarterly fall in clothing sales, increasing the pressure on its chief executive to explain why heavy investment has not yet delivered an anticipated turnaround.

Britain's biggest clothing retailer, which also sells homewares and upmarket foods, will publish fourth-quarter sales on Thursday, ahead of results for 2013-14 on May 20 when it is expected to deliver a third straight year of falling profit.

The 130-year-old group is forecast to report a drop in sales of general merchandise - clothing, footwear and homewares - of 0.5 percent to 1.5 percent at shops open over a year in the 13 weeks to March 29, according to a company poll of six analysts.

The average forecast for a fall of 1 percent compares with a 2.1 percent decline in the third quarter, which included the key Christmas period.

Marc Bolland, CEO since 2010, is at the end of a three-year, 2.3 billion pounds ($3.8 billion) plan to address decades of under-investment and transform Marks & Spencer (M&S) into an international, "multi-channel" retailer, connecting with customers through stores, the Internet and mobile devices.

The group has spent heavily on revamping its clothing operation, redesigning stores and overhauling logistics and IT to complement a new web platform that went live in February.

But Bolland's new clothing team led by John Dixon, the former head of food, has failed to deliver the anticipated pick-up in sales, despite new ranges receiving generally positive reviews.

Bolland is likely to point to unhelpfully wet weather, a clothing market that stayed highly promotional after Christmas and an unhelpful calendar, with Easter not falling in M&S's fourth quarter this year, as it did last year, as well as continued pressure on consumers' disposable incomes.

"Management will always want more time to turn the business around, but the time for excuses is running out," said independent retail analyst Nick Bubb.

M&S's food business, which contributes over half of group sales, has been performing better than clothing, delivering 17 straight quarters of like-for-like sales growth.

However, even here growth is slowing with analysts forecasting fourth-quarter like-for-like sales in a range of flat to up 0.5 percent. The average forecast for a rise of 0.2 percent compares with a third quarter increase of 1.6 percent.

Analysts are currently on average forecasting M&S will make a pretax profit for fiscal 2013-14 of 623 million pounds, down from 665 million pounds made in 2012-13.

"General merchandise shows no sign of improving either market share or gross margins, and food's ability to outperform an increasingly challenging UK food market is coming under increasing pressure. As a result earnings revisions are likely to remain under pressure," said analysts at Credit Suisse.

On April 1 M&S held an investor seminar in Paris and detailed plans to expand its international stores by more than a half as part of its strategy to revive its fortunes.

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