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Marks & Spencer Clothing Sales Drop Worsens as Discounts Fail

Rosie Huntington-Whiteley in Marks & Spencer Christmas ad | Source: M&S
By
  • Bloomberg

LONDON, United Kingdom — Marks & Spencer Group Plc reported a tenth straight quarter of falling clothing sales, indicating that heavy discounting before Christmas had little effect in luring customers back to Britain's largest apparel retailer.

Non-food sales at stores open at least a year fell 2.1 percent in the 13 weeks ended Dec. 28, the London-based company said in a statement today. That’s worse than the median estimate for unchanged sales in a Bloomberg News survey of 19 analysts. Food sales rose 1.6 percent on that basis, less than the 2 percent anticipated by the analysts surveyed.

Marks & Spencer failed to match growth reported by clothing competitors Next Plc, John Lewis and House of Fraser, all of whom benefited from growth in their online units. Unlike Next, the retailer offered discounts before Christmas, cutting prices by as much as half on the key fall/winter collection to shift inventory.

“This has been a challenging quarter for the general merchandise market, with unseasonal conditions and higher-than- ever levels of discounting,” the company said in the statement, adding that it responded to an increased level of promotional activity in the market with discounts of its own.

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Marks & Spencer rose 3.8 pence, or 0.9 percent, to 444.9 pence in London trading yesterday. The shares gained 13 percent last year, trailing a 33 percent increase in the FTSE 350 General Retailers Index, the main benchmark for U.K. retail stocks.

The sales decline reflected Marks & Spencer’s continued underperformance in the U.K. apparel market. Sales grew 0.2 percent in the 24 weeks ended Nov. 24, Jamie Merriman, an analyst at Sanford C. Bernstein, wrote in a Dec. 30 note, citing data from researcher Kantar that is not publicly available. That compared with total market growth of 0.9 percent, she said.

Milder weather in the run-up to the holiday held back the retailer’s sales of full-priced merchandise, Cantor Fitzgerald analyst Freddie George said in a note to investors.

“The strategy of reducing the number of lines and backing the winners, which are highly geared to a cold weather environment, including cashmere and coats, appears to have backfired as the result of the milder-than expected weather over the past two months,” George wrote before the results were published today.

By Gabi Thesing; Editors: Celeste Perri, Robert Valpuesta

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