M&S ups margin outlook, non-food sales still falling

The unseasonably warm autumn weather has taken its toll on Marks & Spencer, with the firm reporting a 13th straight quarterly fall in underlying non-food sales.

But the 130-year-old group did post on Wednesday a rise in underlying first-half profit for the first time in four years, beating expectations as it benefited from improved margins as well as a good performance in food.

M&S also raised its guidance for non-food gross margin for the full 2014-15 year to growth of 150-200 basis points from growth of 100 basis point previously.

Marc Bolland, M&S chief executive since 2010, has spent over £2.3 billion pounds to address decades of under-investment, overseeing the revamp of products, stores, a website and marketing.

He says the group is improving “step by step” but a new clothing team he set up in 2012 has so far failed to deliver a sustained increase in sales and, for the first time, M&S earned less in the year to the end of March than faster-growing rival Next.

Britain’s biggest clothing retailer by revenue said on Wednesday sales of non-food products, spanning clothing, footwear and homewares, at stores open over a year fell 4 per cent in the 13 weeks to September 27th, its fiscal second quarter.

That compared with analysts’ average forecast of down 3.7 per cent and a first quarter decline of 1.5 per cent.

M&S said “unseasonal conditions” in September adversely impacted its first-half sales by about 1.3 per cent.

Mild autumn temperatures are not helpful for shifting high-margin winter coats, knitwear and boots.

M&S’s food business, which contributes over half of group sales, is performing better than clothing. Its sales on the same basis rose 0.2 per cent - in line with analysts’ average forecast.

The group’s online sales fell 4.6 per cent in the second quarter having fallen 8.1 percent in the first quarter.

First-half profit before tax before one-off items was £268 million, ahead of analysts’ average forecast of 252 million pounds and up from £262 million last year.

The interim dividend was raised by 0.2 pence to 6.4 pence.

Reuters