M&S expected to reveal disappointing Christmas sales

Monday, 06 January 2014
British department store company Marks & Spencer is expected to reveal poor Christmas trading results this Thursday during its third quarterly sales report, after early seasonal discounting failed to lure holiday shoppers to its stores. Although other British department stores,  such as John Lewis, House of Fraser and Next have all revealed strong trading during the Christmas period, analysts predict that M&S has suffered through its third mediocre Christmas in a row.

M&S predicted to report drop in clothing sales

The department store company is expected to report a decline in general merchandise sales (clothing, footwear and homeware), which is predicted to range between 0.5 percent to 1.5 percent in the 13 weeks to December 31, 2013 M&S's third fiscal quarter. Some analysts have reveal concern that the company's gross margin will have been affect by the decision to offer early seasonal discounting, which could affect M&S's 2013-2014 pre-tax profit forecast of 651 million pounds, reported Reuters.

M&S appears to be one of the few large retailers to report disappointing Christmas sales, which will undoubtedly put pressure on its chief executive, Marc Bolland. Department store company Debenhams recently issued profit warnings following its disappointing Christmas sales, noting that “the market was highly promotional in the run up to Christmas,” and the company had to respond to sales conditions to ensure its offer was competitive.

During the run up to Christmas Day, M&S held its “Mega Day” weekend offer, which included 30 percent off on clothing and 20 percent discount online, a highly irregular offer from the 130 year old department store company. Freddie George at Cantor Fitzgerald told The Telegraph, “Our concerned is that gross margins have been under pressure from higher levels of discounting in general merchandising.”

Despite weak general merchandising sales predictions, food sales are estimated to be up, with analysts predictions ranging between 1.1 percent and 2.5 percent. Analysts at Nomura have estimated that the department store group's like-for-like sales in the UK are up 0.7 percent for its third fiscal quarter. However this forecast does includes a 1.9 percent increase in food sales and a 0.5 percent decreased in general merchandising sales.

Bolland is currently under heavy scrutiny, after he launched a three-year plan back in 2010, with hopes of turning around Marks and Spencer’s declining general merchandise sales and rebuilding its image as an "international, multi-channel retailer.” However after reporting its ninth consecutive quarterly decline in sales, analysts fear that this year will not prove much of an improvement on last years under performing apparel sales.

M&S is releasing its third quarterly trading statement earlier this year, as last year's Christmas trading update was divulged ahead of schedule, which caused the group to make an early statement.

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