M&S to cut prices after weak Christmas

High street giant Marks & Spencer said today that it would roll out more discounts in a bid to pull in customers after weak homewares sales dragged on its Christmas performance.

M&S, which has more than 700 stores in the UK, recorded a 1.8 per cent like-for-like decline in general merchandise sales, excluding VAT, in the 13 weeks to 31 December, while food sales were up 3 per cent. The City forecast a 1.5 per cent decline and 1.5 per cent increase respectively.

The decline in general merchandise sales was driven by a drop in the home division, which fell 13.3 per cent in the period on an all-stores basis, due to the company’s decision to pull technology products from its shelves.

M&S, which launched an advertising campaign starring Green Lantern actor Ryan Reynolds and Transformers actress Rosie Huntington-Whiteley last summer, said it would invest in promotions and sacrifice profit margins to boost trade.

Elsewhere, department store Debenhams said like-for-like sales excluding VAT in the 18 weeks to 7 January were flat as unseasonably warm weather in October and November hit sales and uncertainty in the wider economy affected consumer confidence.

The advertising campaign featuring Reynolds and Huntington-Whitely follows the company’s tradition of casting high-profile actors, singers and sportsmen in its ads.

M&S said its expectations for full-year profit remain unchanged despite the impact its decision to invest in promotions will have on gross margins, as the company plans to offset this with additional savings and “tight management” of costs.

M&S chief executive Marc Bolland said the company had “performed well in a challenging trading environment”.

The group reported a 1.1 per cent increase in clothing sales, on an all-stores basis, reporting its biggest ever quarter for childrenswear, as well as strong sales of menswear and sleepwear.

M&S said food sales benefited from an increased range of products as the company introduced 600 lines.

The company’s website saw sales increase 22.4 per cent, which was boosted by a move to extend the next-day delivery deadline and the launch of its “Christmas Food to Order” service online, which contributed to a 12 per cent increase in orders.

Total group sales, which include 300 international stores, increased 2.4 per cent excluding VAT, driven by continued growth in India and China, as well as good start to its newly opened flagship store in Paris.

There was not much in way of an update on the progress of the group’s £600 million revamp of it stores which it hopes will make its outlets easier to shop in and boost sales of its own brands.

But Matthew McEachran, analyst at Singer Capital, said overall today’s update met market expectations.

He said: “Although not yet evident, management are making progress on the new strategy, and we soon expect to see some benefits flow through to sales and profit from enhancement to the stores, the brand segmentation, and the navigation.”