Marks & Spencer blame warm weather for fashion sales dip

Wednesday, 05 November 2014
ANALYSIS_ British department store group Marks & Spencer is the latest UK retailer to warn that unseasonably warm weather has impacted its trading results. The high street retailer reported its 13th consecutive quarterly decline in general merchandise and clothing sales for the 26 weeks ended 27 September, 2014, blaming its poor results on warm weather. General merchandise first half sales fell 2.3 percent, whilst like-for-like general merchandise sales dropped by 2.6 percent during the six months.

M&S reported an “improved performance” in womenswear sales during the first five months of the period, which increased 1.3 percent, not including the warm weather spell in September. However, overall clothing sales dropped 1.6 percent during the six month period, with like-for-like sales falling 2.2 percent.

“Unseasonal conditions in September adversely impacted first half year” results for M&S

The decline in fashion sales during the first half year is said to have increased as the “unseasonal conditions in September adversely impacted the first half year,” causing customers to hold back from splurging on a new winter wardrobe. The results come a week after fellow retailers such as Next and Supergroup warned that profit had been hit by the warm weather spell and would be lower than previously expected.

The weak performance from M&S's general merchandise division was nearly offset by the retailer's strong food results. Marks & Spencer reported a 2.3 percent increase underlying pre-tax profits to 268 million pounds in the six months to September 27, as group sales grew 1 percent to 4.9 billion pounds. Overall like-for-like sales for the UK fell 0.7 percent during the last six months, as Food sales continue to outperform market expectations with like-for-like sales growing 1 percent.

Despite the continual decline in general merchandise sales, Marc Bolland, chief executive at M&S remains positive the group “is on track to return to growth ahead of [its] peak trading period...we are confident that we are well set up for the Key Christmas trading period.”

“M&S delivered sales growth and increased profit in the first half despite a tough market, particularly in September. We are pleased with the progress we have made against our key priorities for the year. Within Clothing, Womenswear performance continues to improve with growth in full price sales and increasingly positive feedback from our customers.”

"The recent market conditions remain challenging" for M&S

“However, the recent market conditions remain challenging, with unseasonal weather resulting in high levels of promotional activity across the market. Our focus continues to be on driving gross margin improvement,” added Bolland. Veteran City commentator David Buik noted that M&S’s results were “not quite as bad as expected,” whilst Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, believes that Marks & Spencer is still a “work in progress.”

Neil Saunders, managing director of Conlumino, told the BBC that M&S's results suggest that the overall picture was improving and the increase in womenswear sales could mean that “the years of decline may well have bottomed out. Beneath the surface some faint glimmers of hope are beginning to shine through as the company's strategy starts to deliver.”

However as Dharshini David, British economist and presenter for Sky News points out: “Marks & Spencer say that they see 'increasingly positive feedback from customers,' but their clothing sales are still down 2.2 percent - is that really down to weather?” as other analysts remain cautious on the retailer's recovery.

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