Sunday 8 January 2017

M&S To Bring A Warm Happy New Year


Marks And Spencer is set to shrug off gloomy warnings from rival Next and show a long-awaited recovery in its clothing arm when it posts Christmas figures next week.

The retail bellwether is expected by most analysts on Thursday to eke out a 0.2 per cent rise in third quarter sales across its general merchandise business, which would mark the division’s first sales growth since early 2015.

It would come despite City fears over the group’s festive performance after fashion chain Next warned on sales and profits after dismal Christmas trading.

Shares in M&S and Debenhams were hit hard as Next boss Lord Wolfson warned of an “even tougher” 2017 for clothes retailers.

Clive Black at Shore Capital believes many of the woes at Next are “centred on company rather than market-specific matters”.

He is predicting clothing sales at M&S in the range of minus 0.5 per cent to growth of 0.5 per cent.

Retail analyst Andrew Wade at Numis Securities is more optimistic and expects clothing and homewares sales to rise by as much as 1 per cent.

But he said much of this is down to the exceptionally weak performance from a year earlier, when sales in the division fell by nearly six per cent.

He said: “M&S performed so poorly in clothing and homewares through the third quarter last year, we see a good possibility that the division reports a small positive like for like outcome this time.”

He added that the result could also be helped by more favourable weather and the timing of Christmas, which has meant extra trading days compared with a year earlier. The firm’s food halls are set to see sales remain flat, according to Numis.

A recovery in the clothing business would be a welcome boost for M&S boss Steve Rowe and his team, even if it proves temporary.

Rowe announced plans in November to close around 30 UK stores and convert 45 more into food-only shops, while also announcing a retreat from a raft of international markets.

The overhaul will affect around 100 stores as it looks to cut back on clothing and home while boosting its Simply Food chain.

Details of the restructure came as it said underlying pre-tax profits fell 18.6 per cent to £231.3 million in the six months to October 1, while bottom-line profits crashed 88.4 per cent to £25.1 million.

Supermarket giant Tesco is expected to emerge as one of the festive winners in the sector in next week’s raft of updates.

Experts at Shore Capital believe the chain kept its sales recovery on track over the crucial Christmas season, putting its Big Four rivals in the shade.

The group saw like-for-like sales rise by 0.9 per cent in its second quarter as its fightback against the discounters gathered pace.

This marked its third quarter of sales growth in a row.

Clive Black at Shore Capital predicts the group will have notched up its fourth quarter in a row of rising sales over the festive period, with like-for-like growth of 1.25 per cent to 1.75 per cent in the three months to the end of November.

He said Thursday’s update may show slightly slower growth in the key six-week Christmas period, at 1.4 per cent after the group axed its Clubcard boost promotion, although this is still set to be a winning performance against its main rivals.

It would also mark a step up from the 1.3 per cent Christmas sales hike seen a year earlier.



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