M&S sales continue to fall as Bolland has to hope for tenth time lucky

Marks and Spencer has said this morning that its transformation is on track, although profits were 8.9 per cent lower at £261.1m during the six months to the end of September - the company's ninth reported loss. (Release)

Analysts had predicted a 12 per cent decline in profits for the first half of the year, and chief executive Marc Bolland seemed optimistic, saying that M&S's re-launched womenswear had been well received by customers and is showing "some early signs of improvement".

Like-for-like clothing and homeware sales dropped 1.5 per cent during the period, and 1.3 per cent during the company's last quarter (July to September). Food (up 2.5 per cent like-for-like), international sales and M&S.com all performed well, said Bolland.

Neil Shah, analyst at Edison Investment Research, said that signs of improvement come from the near sell out of the latest fashion line and "this has to translate into like-for-like growth in the third quarter and beyond over the key Christmas to New Year trading weeks of the fourth quarter."

Primark, who reported bumper growth this morning, is benefitting from consumers still being "hard hit" on their discretionary spend, says Shah, which is exactly why M&S is losing out. "Today's results show M&S is addressing its fashion issues but do not remove the pressure from Mr Bolland, who knows it has to be tenth time lucky for his long term future as chief executive."
Shares climbed briefly this morning on the news.
Statutory profit before tax was £280.6m in the six months to September, a marginal increase on last year's £280.0m. Group sales for the period stood at £4.9bn, compared with £4.7bn in the first half of 2012.

Over the course of next year and 2015, he said, M&S will move to a "lower, more sustainable long-term investment level of c.£550m." Bolland says that this, combined with operational improvements, should deliver a noticeable improvement over 2014/15.

When it comes to the financial year 2013/14, the company says it remains cautious but retains its expectations, anticipating gross margins to grow by 0.30 percentage points to 0.5 percentage points. General merchandise, it says, will be up on the year, while food will be ahead of the guided range.