Marks & Spencer expected to disappoint ahead of shareholders meeting

Monday, 06 July 2015

The market anticipates Marks and Spencer to have suffered another blow in its attempts to get its clothing business back on track, mainly due to cool weather in May and June dampened sales.

Britain’s biggest high-street clothing retailer is expected this week to report a slide in like-for-like sales in its general merchandise division, which includes clothing, of around 1 percent for the past quarter, reports Yahoo Finance.

As explained by the ‘Sun Times’, the retailer has been badly affected by weak demand for its spring and summer clothing given the unseasonably warm weather.

The setback is expected to be painful for M&S chief executive Marc Bolland who, just six weeks ago, pointed to a recovery of clothing sales in the last quarter as a sign that his turnaround was beginning to pay off.

However, there is light at the end of the tunnel, as points out Paul Rossington, analyst at HSBC, who said: “Were it not for the cold weather in May, the impact of which is evident at sector level, we would have expected GM top-line growth to continue. Despite this short-term setback, we believe that the long-term turnaround strategy is intact.”

The company will unveil its latest trading update on the morning of its annual meeting at Wembley Stadium on Tuesday.

On a more positive note, it is noteworthy that Marks & Spencer reported increased annual profits for the first time in four years what will allow the retailer to return an extra 150 million pounds to investors.

For the three months to the end of March, the retailer also saw the first growth in general merchandise sales for four years, but that recovery will be dampened by the latest figures, highlights the ‘Sunday Times’.

Kate Calvert, analyst at Investec added: “While the clothing industry had a difficult spring/summer weather comparable versus last year’s almost- ideal weather, M&S had relatively weak comps given its online platform transition issues last year. However, the early start to its sales June 17 implies that May’s cooler weather didn’t help and Q1 LFL may have turned negative.”

Meanwhile, analysts at Peel Hunt said that while the weather in May had been unhelpful, “it was hardly a monsoon and other fashion retailers... have come through unscathed”.

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