Marks & Spencer Reports Growth in Food

“We continue to be first to market with exciting new ranges such as ‘Simply Fuller Longer’ and are on track to launch over 1,500 new lines this year.”

8 Apr 2010 --- UK retailer Marks & Spencer has delivered a strong performance over the quarter. Total UK sales were up 6.2% over the period, marking a further improvement in the trend seen over the last five quarters.

Performance improved across all areas of General Merchandise, as customers continued to seek out affordable quality and style. Clothing market share was up 110bps to 11.9%. In Food, the company delivered a sixth consecutive quarter of improved performance, as better value, availability and product innovation have continued to drive improved like-for-like sales. “We continue to be first to market with exciting new ranges such as ‘Simply Fuller Longer’ and are on track to launch over 1,500 new lines this year.”

M&S Direct had another strong quarter with sales up 48% as the company extended ‘Shop Your Way’, a multi-channel ordering service, to over 300 stores. International sales were down 5.9%, as a result of particularly difficult trading conditions in the Republic of Ireland and Greece, and an adverse impact from currency translation.

M&S said it expects profit before tax for 52 weeks of 2009/10 (to 27 March 2010) to be in the range of £620m to £630m. The 53rd week (to 3 April 2010) is expected to contribute an additional c.£60m of profit before tax. These figures reflect gross margin better than the guidance of -50 to -100 bps, and operating costs at the top end of the 0 to +1% range. “As a result of out-performance against our plan for this year, we are paying a bonus of around £80m shared by all our employees,” the company stated.

Sir Stuart Rose, Chairman said: “These are strong quarterly results by any measure. They demonstrate the appeal of the M&S brand to our 21 million weekly customers and its resilience in these difficult times. The continuing improvement in our performance is the result of the actions we have taken to invest in our stores, service, product and values. In clothing we have seen a substantial increase in market share and in food we have had six consecutive quarters of improving like-for-like performance.

“We have weathered the immediate impact of the recession but remain cautious about the outlook for 2010/11 given the current challenging environment. We hope that after the election there will be greater clarity on economic policy and how this will impact our customers individually. With this will come improving consumer confidence which is so important for our business and the economy as a whole.”

Guidance for financial year 2010/11:
• Gross margin is expected to be broadly level with last year.
• Operating costs before bonus are expected to increase by 4% to 5%, as a result of space growth, increased depreciation and cost inflation.
• The planned opening of new footage will add around 2% to total space, representing a c. 1.5% increase in general merchandise and c. 2.5% increase in food footage, on a weighted average basis. Total square footage at 3 April 2010 was around 15.3m square feet.
• Group capital expenditure for 2010/11 is expected to be in the range of £500-550m.