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Rowe admits to 'mixed quarter'

M&S takes food hit from supermarket rivals

Marks & SpencerMarks & Spencer showed the impact of premium food lines offered by supermarket rivals as its third quarter food sales fell.

The group reported a 0.4% fall in food sales while clothing slumped 2.8%, giving a combined decline of 1.4% for the period.

It said Christmas trading offset a weak clothing market in October and a continuing underperformance in its food business.

Analysts noted that Morrisons, Tesco and Waitrose enjoyed a strong Christmas in fresh foods.  Tesco reported like-for-like sales growth of 1.9% driven by a 3.4% rise in food (including a 3.7% surge in fresh food). It said it enjoyed its biggest ever sales week in the UK, driven by fresh food market outperformance of nearly 4%.

Commenting on the squeeze on M&S Bryan Roberts at TCC Global said: “It is within food that many rivals have closed the gap on M&S in terms of innovation and premium ranges.”

Neil Wilson, senior market analysts, at ETX Capital, pointed the finger at CEO Steve Rowe.

“There could be serious question marks over Steve Rowe’s turnaround strategy,” he said.

“There is no repackaging these figures as anything short of very disappointing. Food is the worry – it’s been the easy win for M&S for years but suffered a 0.4% LFL decline.

“Other grocers registered solid increases and crucially may be eating into M&S’s premium niche. Waitrose – probably its closest apples-to-apples rival in food – saw LFL sales up 1.5%.”

Mr Rowe said the company had a “mixed quarter” with better Christmas trading in both businesses going some way to offset a weak clothing market in October and ongoing underperformance in food like-for-like sales.  As a result, full year guidance remains unchanged.

He referred to “ongoing trading pressures” in the lead up to Christmas as consumer spending and choices reflected tighter budgets. He said it was making further changes to get the business back on track.

Elsewhere, retailers reported mixed results. House of Fraser followed Debenhams with disappointing figures but John Lewis had a record Christmas. Online trader Boohoo saw sales rocket, an indication of the strength of internet retailing.

House of Fraser: The high street department store chain, which includes Jenners, said sales in stores for the six weeks to Christmas were down 2.9% and sales during first week of its Christmas sale were “disappointing”.

John Lewis Partnership: Sales rose by 2.5% to £1.96 billion in the six weeks to 30 December. Sales at the John Lewis department stores were up 3.1% on a like-for-like basis.

Like-for-like sales at its Waitrose supermarkets – excluding fuel – came in 1.5% higher on last year.

Black Friday was John Lewis’s most successful sales day ever and contributed to the biggest week of sales, up 7.2% year-on-year.

Boohoo: reported record revenue for the four months that include the Christmas period, and Black Friday. Revenue doubled to £228.2m. Its brands also include Nasty Gal and PrettyLittleThing.

Founded in Manchester the company is only 12 years old and says its growth will continue at a similar rate. It is expecting growth this financial year  to be around 90%

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