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Wednesday, 11 January 2012 |
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 Marks & Spencer warned of fierce discounting on the high street after it posted disappointing general merchandise sales over Christmas. The City estimates that the retail giant's price slashing will result in its non-food margins tumbling this year,
although the 128-year-old retailer said it would offset this fall with costs savings.
The 703-store chain's pr efforts failed to prevent M&S's underlying general sales falling by 1.8 per cent over the 13 weeks to 31 December – already below City forecasts – although its food division performed much better. The company's performance supports the view that while Christmas 2011 was not great, it was not the disaster zone that some industry experts had predicted.
Marc Bolland, the chief executive of M&S, said: "We expect there will be some promotional pressure, but we will also have some opening price points coming through."
Total UK sales at M&S, which has more than 300 shops overseas, rose by 1.8 per cent, while they were up by 0.5 per cent on a like-for-like basis.
But intense promotional activity took its toll on the chain, with Credit Suisse estimating a 200 basis points hit to its non-food gross margins in its third-quarter. But M&S said this will be offset by additional savings from "ongoing, tight management of costs" over its current financial year.
Alan Stewart, the retailer's finance director, said "This is about efficiencies across all parts of our business." Asked about any potential job cuts, he said: "We are not talking about big redundancies at all."
M&S maintained its full-year profit guidance for £697m, down on the £714m in 2010-11 and a long way from the £1bn-plus four years ago.
While M&S's total clothing sales grew 1.1 per cent over the 13 weeks, this was boosted by new stores and non-food inflation and means they fell on a like-for-like basis.
While Mr Bolland touted a boost from this summer's Diamond Jubilee, European Football Championship and Olympics, he expects another tough year for the sector.
"It is going to be a more difficult year, like 2011 was, for customers," he said.
Image: M&S AW11
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