'Headwinds' spoil M&S sales surge

Published on Wednesday 6 January 2010 21:08

MARKS & Spencer posted its first rise in underlying sales for more than two years yesterday, but chief executive Sir Stuart Rose warned of "headwinds" in 2010 and praised resurgent rival Waitrose.

M&S's shares closed down almost 7 per cent as the market judged the headline performance to have missed targets, with UK like-for-like sales growth of 0.8 per cent and UK merchandise, including clothing, up 1.2 per cent. Food was ahead 0.4 per cent.

But Rose said underlying UK sales growth in the 13 weeks to 26 December was a healthier 1.8 per cent adjusted for the fact that the same period the previous year included an extra day of the post-Christmas clearance sale.

General merchandise sales, adjusted for this fact, would have been up a further 2 per cent, he said.

The M&S chief gave warning that steps taken to reduce public debt by whatever government is in power after this year's election would hit consumer spending. He said: "We do need to get the (public] deficit down. There will be headwinds in terms of (extra] taxation whether direct of indirect."

Rose, referring to difficult decisions affecting consumer spending being put off until after the election, added: "There's no doubt about it that there's a phoney war.

"We know that we've got some medicine coming. But we don't know what the doctor is going to give us."

The M&S boss also praised arch-rival in the upmarket food sector, Waitrose, widely seen as having performed more strongly in recent times.

Earlier this week Waitrose announced a 9 per cent jump in same-floorspace sales in the five weeks to 2 January.

Rose said Waitrose had "done a good job", adding: "It's been well-aired over the last year or so. I take my hat off to them".

Some City analysts said yesterday that the 6 per cent rise in overseas sales at M&S was relatively lacklustre.

But group finance director Ian Dyson said this was because the company was operating in "struggling economies" such as Ireland and Greece, and parts of the Middle East. Dyson said the group's guidance on profit margins remained the same as last November, when it suggested they were likely to fall between 50 and 100 basis points.

Rose also said that M&S's chief executive designate Marc Bolland, whom it poached from supermarket group Morrison in November, was unlikely to start with M&S until the spring, later than the City had hoped.

"We don't have a release date from Morrison yet, it's a matter between Morrison and Marc. Your guess is as good as mine," Rose said. M&S, which said it had benefited in the freeze from strong sales of knitwear and sleepwear, saw its shares close down 27.5p at 377.4p.

&#149 Waitrose was the supermarket sector's "star performer" over Christmas, according to research out today from Neilson. Till-roll figures showed the chain posted a 14 per cent year-on-year sales hike in the four weeks to 26 December, beating Morrisons (11.8 per cent), Asda (8.6 per cent), Sainsbury's (7.7 per cent) and Tesco (7.4 per cent).