Marks & Spencer suffered a 5.8% slump in clothing and homeware sales over its crucial Christmas quarter, much worse than the City had feared, after being hit by mild weather, fierce discounting by rivals, and problems at its distribution centre.
The drop in underlying sales at its core general merchandise division marks the group’s 14th quarter of falling sales. The food division also disappointed, with sales up by just 0.1%. Online sales fell 5.9%, with the group dogged by problems at its hi-tech distribution centre in Castle Donington, which opened 18 months ago.
Overall, underlying sales at the retailer were down 2.7%.
Chief executive Marc Bolland said: “We had a difficult quarter in general merchandise, dominated by unseasonal conditions and an unsatisfactory performance in our e-commerce distribution centre.” He said the problems at the distribution centre had now been fixed.
Bolland said unusually warm weather in October and November meant customers bought fewer autumn and winter clothes, and led to heavy price-cutting in the sector. “We deliberately held back the level of discounting especially in December. While this had an adverse impact on sales we delivered a good performance on gross margin,” he said.
Bolland insisted that M&S had a “very good Christmas in food” with record sales, outperforming the market. Food sales were up 17% in the Christmas week as the retailer sold record numbers of turkeys, desserts and party food.
Neil Saunders, who heads the retail research consultancy Conlumino, said: “When it last updated the market back in November, M&S’s numbers were showing some signs of improvement. Unfortunately, this dismal set of figures indicates this momentum has not been carried through into the Christmas quarter. Even more discouraging is the fact that the progress from Christmas 2013, when M&S presented a fairly sound set of trading numbers, has not been built upon.”
Independent retail analyst Nick Bubb tweeted: “Awful M&S sales figures, with Food only flat LFL and Non-Food nearly 6% down LFL in Q3 but cost-cutting has saved them from a profit warning.”
