Irish stores weigh on M&S results

Marks & Spencer (M&S) flagged difficulties at its Irish business in the first half of the year as it said sales across the retail group had declined on poor demand for clothing and food.

After more than a decade of failed turnaround programmes, M&S is now targeting sustainable, profitable growth in three to five years by shutting less successful stores. It warned on Wednesday that sales were unlikely to improve soon.

“Trading conditions remain challenging and the headwinds from the growth of online competition and the march of the discounters remain strong in all our markets,” it said.

Shares in M&S, which have fallen more than 4 per cent so far this year, dropped 0.53 per cent on the day.

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The group said trading in the Republic, where it has 18 outlets, had been “difficult”. While it didn’t specify the issues it was having in the Republic, it noted its problems were similar to the UK.

"That makes sense because they're facing the same challenges [in the Republic]," Nick Hawkins, an analyst at Cenkos Securities, told The Irish Times. He added that the company still have a number of challenges to face, chief among them is dealing with its online offering.

M&S launched its latest turnaround plan last November, two months after retail veteran Archie Norman joined as chairman to work alongside chief executive Steve Rowe, a company lifer.

Like other established retailers, M&S is trying to deal with the shift of clothing sales online along with unrelenting price competition from supermarkets and discounters.

Pressure on consumer spending, a shift in expenditure towards experiences and away from clothing, as well as unhelpful weather trends have also hampered efforts to revive its business.

Results on Wednesday showed that its previously reliable food business was particularly weak, with like-for-like sales down 2.9 per cent – below expectations of a 2 per cent fall and reflecting the need for price cuts. Gross margin in the division fell 25 basis points.

Clothing and home

Sales in its clothing and home division – often the first port of call for school uniforms, interview suits and underwear – fell 1.1 per cent on a like-for-like basis while its gross margin was down 20 basis points.

“Against the background of profound structural change in our industry, we are leaving no stone unturned and reshaping our business, its organisation and culture,” said Mr Rowe.

The group said its full-year outlook was broadly unchanged and it maintained its interim dividend however as cost cuts helped underlying profit to rise by 2 per cent to £223.5 million (€256 million) in the six months to September 29th, ahead of analysts’ average forecast of £203 million.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said the broad direction of travel at M&S would not come as a shock to anyone, although he noted that the food business looked particularly jaded. M&S has previously attracted more affluent shoppers who pick up meal deals and wine on their way home. Khalaf said that approach was now facing competition from online competitors such as Hello Fresh, Deliveroo and Just Eat.

“These providers present a particular threat to M&S seeing as many of its customers are buying a quick meal for that night, rather than a full weekly shop,” he said. – Reuters