Investors and retail observers allowed themselves a small sigh of relief in April when Marks & Spencer brought 14 consecutive quarters of falling general merchandise sales to a halt.
After efforts to improve the quality and style of its clothing and to win back disillusioned customers, it seemed to have broken a spell.
A month later, the high street stalwart reported further good news with its first rise in annual profit. Chief executive Marc Bolland hailed the recovery as a “a step in the direction” with gross margins also on the mend.
However, those words seem to have been spoken too soon. First quarter results released yesterday showed like-for-like sales slipped back again by 0.4 per cent in the 13 weeks to 27 June, after the cold weather in May dampened demand.
Shares in M&S, which have risen by a quarter over the last year on hopes of a turnaround, fell nearly two per cent yesterday on the results. This was despite a strong performance across its food business, with like-for-like sales up 0.3 per cent.
Speaking to hundreds of shareholders at the company’s annual general meeting at Wembley Stadium yesterday, long-standing chairman Robert Swannel admitted the performance was “disappointing”.
But he insisted that the business was seeing improvements after taking “decisive action” following problems at its distribution centre last Christmas.
“Our customers are coming back and actually you will continue to see style and quality improve step by step,” he said.
Several shareholders – some of whom were seasoned buyers and merchandisers – appeared unimpressed with the turnaround of its clothing arm. Mrs Conway, a former womenswear designer for M&S for nearly 25 years, said: “I could weep when I see what’s in stores today. Where is the originality, where is the flair? Where is the newness and where is the good taste?”
“The day you make garments they want to buy, your customers will return in droves,” she added. Her comments were greeted with applause.
The company has spent billions of pounds on the redesign of products, stores, supply chain logistics and the website. It is also shaking up the way it buys and makes clothing by bringing more design in-house and sourcing goods directly from suppliers.
“You will see more newness in stores and better availability,” Bolland told shareholders, arguing that the priority for general merchandise is primarily to focus on gross margins rather than sales.
He also pointed to improvements across its website following its relaunch last year, with a growth of 38.7 per cent.
The performance left analysts with mixed feeling as to whether M&S’s clothing arm will be able to regain momentum. Cantor Fitgerald’s Freddie George said: “Although we believe that at last there have been some visible improvements to the fashionability and quality...it will be a challenge to keep the positive momentum in sales in both general merchandise and food going.”