Marks & Spencer's share price dropped this morning, as the retailer posted yet another quarterly drop in clothing sales - although the rate of decline is beginning to slow under new chief executive Steve Rowe.
Group revenues rose 2.7 per cent year-on-year to £2.53bn, with the UK arm rising 2.6 per cent to £2.26bn, although like-for-likes dipped 0.5 per cent.
Clothing and home, which has been in decline for years, registered a year-on-year drop of 0.5 per cent to £852m, with like-for-likes down 1.2 per cent. Food rose 4.5 per cent to £1.4bn, although like-for-likes nudged down 0.1 per cent.
The timing of Easter is estimated to have increased revenue growth in food by around 0.7 per cent and in clothing by 0.6 per cent.
International revenue increased 3.8 per cent (down 4 per cent in constant currency). M&S has now closed 28 of 53 stores as part of a planned exit.
Full year guidance remains unchanged.
M&S' share price fell 1.2 per cent in early trading.
What M&S said
"Trading in the first quarter was in line with our expectations and we are on track with delivery of the plan we announced last year," said chief executive Steve Rowe.
"I am pleased that we continue to grow full price sales in clothing and home, with reduced discounting and no clearance sale in the quarter. In our food business, we delivered strong growth from new Simply Food openings, and are prioritising better ranging and stronger promotions."
Regarding the clothing division, he added
In line with our strategy, full price sales were up seven per cent, as we reduced the number of promotions and there was no clearance sale in the quarter compared with one last year. We start our summer sale today, a week later than last year, with terminal stock for the season significantly down.
What analysts said
Adam Tomlinson at Liberum noted that clothing like-for-likes fell "on a very weak comp. of -8.9 per cent, but this was an improvement vs Q4 17 of -5.9 per cent".
"We believe today’s update demonstrates that strategic initiatives are delivering some improvement across the business, which if maintained, could cause us to reappraise M&S’s investment case," he added.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said things were getting "less bad... but with sales still falling there’s still not too much to cheer about".
"However the fact that things are on an improving trend at least vindicates the decision to reduce promotional pricing, which should improve margins...Overall conditions for high street retailers remain pretty grim, with consumer purses under pressure and competition coming from all angles. M&S is swimming quite hard against this tide, so it deserves some credit for treading water."
Cantor's Mark Photiades was less upbeat.
"We continue to believe the scale of the task ahead to turn around the fortunes of the business should not be underestimated and prefer to err on the side of caution. We maintain our sell recommendation and 300p target price," he said.
"Hope appeared to be building ahead of the prelims in May that this management team could be the one to crack the M&S conundrum but the shares have fallen by c.12 per cent since the results, underperforming the All Share by c.10 per cent, despite the initial degree of optimism following the appointment of the new chairman and the new C&H MD."
Kathleen Brooks, research director at City Index, shared his view.
"The best way to sum up M&S’s Q1 sales was disappointing," she said. "Rowe has implemented a five-year turnaround plan, however, M&S isn’t going anywhere according to these results. Analysts are blaming the fact that Rowe’s plan means that there is no clearance sale at M&S these days, which is hitting sales, also some are questioning whether his plan is not only too expensive, but it doesn’t go far enough since he is only planning to close 53 stores nationwide."
Paul Thomas, senior consultant at Retail Remendy, said: "The later timing of Easter and going into clearance activity later than last year, clouds this quarter's M&S performance. There is no doubt it is better than their Q4, but not yet worthy of a "turn of fortunes" headline we feel.
"Steve Rowe, in his statement puts emphasis on increasing full price sales, not so hard to do when you push clearance activity back by a week. Our concern is declining like for like sales do not deliver increased profit with only an improved gross margin. We would rather have heard about focus on delivering fashion that the customer wants to shop or increased transactions through the till."