Marks & Spencer shares slip as clothing underperformance weighs on Christmas trading
Marks & Spencer’s Christmas performance was weakened by poor sales in its menswear business, after the retailer ordered too many skinny jeans in the wrong sizes.
The high street chain said it over ordered skinny and slim-fit mens’ trousers, under-bought regular fit jeans and had too many small sizes and not enough medium and large.
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Share dropped as much as 10 per cent after the retailer said its troubled clothing and home division suffered a 3.7 per cent drop in total revenue, while the unit’s like-for-like revenue slumped 1.7 per cent in the third quarter.
M&S chief executive Steve Rowe has been trying to turn the unit’s fortunes around, and said it had made progress in the womenswear department.
The poor clothing and home performance was off-set by like-for-like revenue growth of 1.4 per cent in its food business, leading to a 0.2 per cent increase overall in group UK like-for-like revenue. Total UK revenue dropped 0.6 per cent to £2.8bn.
While the food division reported an increase in sales volumes, the unit also experienced higher waste levels.
Sales of traditional gifts were also poor in the crucial Christmas trading period, as customers favoured more expensive presents such as cashmere jumpers.
Rowe also said levels of discounting among M&S’s rivals on Black Friday and in the run-up to Christmas were “unprecedented”.
Anusha Couttigane, principal fashion analyst at Kantar, said: “With former F&F director Richard Price set to take the helm of clothing and home, he will have his work cut out for him, not least in the company’s online performance, where social commerce is becoming more and more important to unlocking conversion.
“In its traditional categories, such as festive womenswear and novelty childrenswear, we see that M&S can play to its strengths, but Mr Price will need to bring the retailer’s menswear performance in line with the rest of the division.”
“The food department continues to be the star performer of the group, while the clothing and home operation is still a drag on the overall business,” said CMC Markets’ David Madden.
Madden added that M&S “needs to reform or restructure the clothing business as the food operation can’t be expected to carry the operation forever”.
The retailer’s international division reported a 2.3 per cent drop in total revenue for the 13 weeks to 28 December, and a drop of 0.7 per cent across the entire group.
Online revenue from M&S’s UK clothing and home divisions rose 1.5 per cent during the quarter – a smaller increase than expected as the retailer was hit by “competitor discounting” during December.
“In a tough market, these figures signal a much-improved performance from the retailer and could signal the green shoots of recovery in the ongoing transformation of the business,” said Retail Economics chief executive Richard Lim.
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“While clothing and home lagged overall growth, it still improved on previous performances. The major disappointment came in the online business that barely showed any meaningful signs of growth.”
Lim added that “integrating a seamless digital proposition” remains “the key challenge” for M&S.