Clothing woes hit Marks & Spencer profits
“Tougher comparatives, calendar adjustments, later timing of Easter and reduced promotional activity mean clothing and home like-for-like sales will have turned negative in Q4,” said Paul Rossington, retail analyst at HSBC Global Research.
The results come after two major boardroom changes at M&S recently. But neither chairman designate Archie Norman nor Jill McDonald, the current chief executive of Halfords who is being brought in to lead the turnaround of M&S’s clothing arm, will be at the presentation.
Norman, a UK retail doyen who headed supermarket giant Asda, becomes chairman of the company on 1 September, while McDonald is due to join around October.
M&S achieved its first rise in clothing and home sales for nearly two years in January, but this is expected to have been only a reprieve as the timing of Easter has impacted trading in the group’s fourth quarter.
Analysts forecast M&S will say on Wednesday that clothing and home sales fell 3.3 per cent in the three months to the end of March, following a 2.3 per cent rise in the previous three months.
Food sales are expected to have dropped by nearly 1 per cent in the final quarter. The consensus for underlying pre-tax profits for the year is £593 million – down 13 per cent on profit of £684m the previous year.
Group chief executive Steve Rowe, who took over the M&S helm from Marc Bolland in April 2016, has warned that profits and the hoped for turnaround in the core clothing business will take time, but Q3 trading gave hope that the group was beginning to turn the corner.
Analysts at Numis Securities said that stripping out the effects of this year’s later Easter, clothing sales are likely to have been close to flat.
But Jonathan Pritchard, retail analyst at Peel Hunt, said that sales will have “regained their poise” since the Easter-affected fourth quarter.
He said: “We think that the immediate changes that management made to the offer, merchandising and service are starting to resonate with customers.”
McDonald has been recruited into the new role of managing director for clothing, home and beauty. Norman succeeds Robert Swannell as M&S’s chairman.
Pritchard said his appointment to the chain was welcome news. “Who better to chair a recovery than Archie?” he added.
Rossington at HSBC said given the “positive momentum” gathering within the business he expected a potential return for like-for-like clothing and homes sales growth in the current financial year.