Relief for Rose as M&S sales stabilise

Published on Wednesday 1 July 2009 21:15

MARKS & Spencer's embattled executive chairman Sir Stuart Rose eased pressure on the high street stalwart yesterday by unveiling a smaller-than-expected fall in sales.

Rose, who has faced flak due to recent trading and corporate governance issues, said there were signs of an improved trend in the group's performance, although he remained cautious about prospects for this year and next.

"This time last year it was a very difficult situation because we were headed downhill," he observed. "But it's very hard to call whether this is a plateau, whether this is a continuing decline, whether there's any movement upwards.

"So I'm not saying there are any green shoots, I'm just saying this is a stable situation – so far, so good."

The trading update revealed that like-for-like sales in the UK slipped 1.4 per cent in the 13 weeks to 27 June, compared with a year earlier. City forecasts had ranged from a drop of 1.8 per cent to 3.5 per cent.

Like-for-like UK sales for the last full year fell 5.9 per cent, including a 6.9 per cent drop in general merchandise and a 5 per cent decline in food.

But the fourth quarter suggested a moderately better performance, with sales declines easing to leave sales down 4.2 per cent on a like-for-like basis.

Yesterday's Q1 figures showed same-stores sales were down 2.4 per cent in general merchandise, with food better than expected after a fall of just 0.5 per cent.

The 125-year-old retailer, which has more than 600 stores in Britain and about 285 abroad, has introduced new product lines, cut prices and launched promotions to tackle the spending downturn and competition from the likes of Next and H&M on clothing and Waitrose and Sainsbury's on food.

City firm Numis Securities yesterday added 26 million to its M&S profit forecast, but its estimate for a surplus of 550m in the year to March is still down on this year's reported 604m.

Numis believes warmer weather helped trading, particularly in clothing, after total sales in the category improved by 1.4 per cent and M&S grew market share.

Rose added: "We are pleased with the improving trend in our performance. This demonstrates that the actions we are taking are working."

But M&S is still feeling the heat over Rose's dual management role and other governance issues.

Shareholder body Pirc reiterated calls this week for Rose to split his chairman and chief executive role, branded as a "dangerous concentration of power" when combined.

The M&S chief said the board's position on succession – that it will appoint a new chief executive next year and that Rose will step down as chairman by July 2011 – had not changed.