THE City today cheered a long-awaited rebound in clothing sales at Marks & Spencer – but warned that more signs of recovery were needed to prove the flagging retailer had turned the corner.
Shares in M&S jumped 4.4 per cent to become the second-biggest riser on the FTSE 100, taking their outperformance of the index over the past six months to nearly 40 per cent.
It came as Marc Bolland, group chief executive, announced that the company’s same-floorspace general merchandise sales, dominated by clothing but also including homewares and footwear, lifted 0.7 per cent in the 13 weeks to 28 March.
That followed sales declines for 14 consecutive quarters – nearly four years – including a near-6 per cent slide in the previous trading one.
The extended lacklustre performance had heaped pressure on Bolland, whose turnaround of the group has stuttered since he quit Morrisons supermarket group to take over from Sir Stuart Rose at the M&S helm in August 2010.
The recovery in like-for-like clothing sales confounded City consensus expectations for a further 1.2 per cent fall, while M&S’s food division continued its strong performance with a 0.7 per cent sales lift. It led analysts at Citigate to boost their full-year profit forecast for the retailer by £10 million to £650m.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said the return to growth for clothing sales was “the clear positive”.
He added: “Furthermore, sales growth has been achieved without sacrificing profit margin, whilst the group’s food sales continue to retain momentum in what is a challenging environment.”
However, Bowman echoed the views of a number of City retail analysts by saying the markets would want further evidence to totally buy into the recovery story at M&S.
“This latest performance shows signs of M&S’s general merchandise arm finally turning the corner, but the markets will want to see perhaps two more consecutive periods of sales growth to make the case convincing” Bowman said.
Nicla Di Palma, retail analyst at Brewin Dolphin, said it was “a really good set of results” and an “unexpected” upturn in clothing. But she added that the company was continuing to lose market share “and it is too early to say whether this is the start of a new chapter for M&S”.
A more upbeat Bolland hailed the success of the clothing rebound after years of being in the doldrums. “We have been bang on trend,” he said.
The group said its spring and summer collections have been well received, including its much talked about 1970s-style £199 suede skirt worn worn by TV presenter and model Alexa Chung. It also said its Autograph and Limited Edition brands sold well, with near double-digit rises, during the latest trading quarter.
Bolland declined to say M&S had turned the corner, however, adding: “This is a step by step approach. We are particularly pleased today that our gross margins are also improving.”
The City also noted the return to growth of M&S’s online arm, with a 13.8 per cent rise in sales after the technical problems that affected its festive trading having been ironed out.
On the downside, international sales slid 3.8 per cent due to economic headwinds in Russia, Ukraine and Turkey, as well as a weakening euro.
M&S, while targeting price promotions, has not been one of the fiercer exponents. The company repeated its earlier guidance that over the full trading year to March 2015 its margings would see a rise of between 1.5 and 2 per cent.
M&S’s shares closed up 23.5p at 554p. The group is due to report its full-year results on 20 May.