High street bellwether Marks & Spencer is set to shrug off last week’s gloomy update from rival Next and show a small but long delayed recovery in its clothing arm when it unveils festive trading figures this week.
However, a minority of City retail analysts say that it is a “close call” because M&S is unlikely to have been immune from the headwinds that hit Next when it unveiled a 3.5 per cent fall in full-priced sales at its stores in the two months to Christmas Eve.
These included what Next boss Lord Wolfson called an exceptionally “uncertain” clothing market and cost inflation.
By contrast, M&S is expected by most analysts to have eked out a 0.2 per cent rise in third-quarter sales across its general merchandise business, dominated by clothing, which would mark the division’s first sales growth since early 2015.
Clive Black at Shore Capital said he believed many of Next’s challenges were “centred on company rather than market specific matters”. Showing the fine margins of the forecasts for M&S, Black 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 is forecasting clothing and homeware sales to rise by as much as 1 per cent.
But Wade added that he thought much of this increase would be down to very soft comparators from a year earlier, when M&S general merchandise sales slumped nearly 6 per cent.
“M&S performed so poorly in clothing and homewares through the third quarter last year that we see a good possibility the division will report a small positive like-for-like outcome this time,” he said.
Wade said the results could also be helped by colder weather in the run-up and the timing of Christmas, which has meant extra trading days versus a year earlier. It followed an unseasonably warm September that hit most clothes retailers.
M&S’s food halls, for some years the better performer of the business as clothing has languished, are believed to have seen flat sales, according to Numis.
Analysts said 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 many overseas markets.
The overhaul will affect around 100 stores as M&S looks to cut back on clothing and homewares 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 1 October, while bottom-line profits crashed 88.4 per cent to £25.1m.