06/11/2012 04:16 GMT

M&S Slows Down Sales Decline, But Future Expectations Are Mixed

Profits at Marks and Spencer were better than expected and the decline in sales has slowed, but its underlying pre-tax profit still fell to £296.8 million from the £280m expected by the markets.

The fall in non-food sales by 1.8% in the second quarter of 2012 was better than many analysts had feared, and a vast improvement on the 6.8% decline from the first three months of 2012.

Elsewhere, good progress is being continued with M&S's Plan A - a 180 point commitment to making the company more eco-friendly and ethical.

As of November 2012, 94 of the original 100 commitments achieved, including its operations becoming carbon neutral and sending zero waste to landfill, and efforts are now focussed on longer term commitments and engaging customers in more sustainable living.

Clothes recycling initiative Shwopping was working well too, with 2.2 million used and unwanted pieces of clothing have been 'shwopped' in M&S and Oxfam stores since launch in April and around four million are on course to be 'shwopped' by the end of the year.

Chief executive Marc Bolland told the markets it had taken "decisive action" by improving buying and merchandising, while also overhauling its general merchandise team and hiring new managers - including tasking former Debenhams and Jaeger boss Belinda Earl in the newly-created role of style director.

Food sales were up 1.1% on a like-for-like basis, and clothing and homeware like-for-like sales, were down 4.3%.

Bolland said that strong progress was being made to transform M&S into a "international, multi-channel retailer", with overseas stores performing well.

“As we approach the all important Christmas period, we have better than ever Christmas products, to help our customers enjoy a special Christmas at home,” he added.

Much hope is being pinned on the success of M&S's concept stores, such as the one opened in Cheshire Oaks in August 2012. Sales from these concept stores has been 2.6% ahead of the rest of the business.

However, M&S also recognised it would take until summer 2013 for the full effects of the new management team to be felt by customers.

These include new appointments announced on 6 November; Frances Russell, a former director of Philip Green's Arcadia, is moving up to director of womenswear, replacing Annette Browne, who has left the company.

And Janie Schaffer, currently chief creative officer at Victoria's Secret, will succeed Frances Russell as director of lingerie and beauty early in 2013.

City analysts remained unmoved by M&S's results this morning, with Investec Securities telling investors to sell shares in the chain.

"General merchandise and M&S Money surprised positively, but International is disappointing," said analyst Bethany Hocking.

"The outperformance of Food and online means M&S is becoming a structurally lower margin model. After a good run, we think the shares may be flat to slightly up today."

Redmayne-Bentley’s stockbroker, Lauren Charnley was more positive, telling Huff Post UK: "Marks & Spencer impressed investors with its second quarter results this morning, despite reporting same-store sales 1.4 % lower than the same period a year ago.

"The retailer has struggled of late, particularly its clothing division, as the economic climate remains challenging - regardless of Bolland pledging £500m to revamp domestic stores.

“Competition is tough but M&S still managed to post a pre-profit of £289.5m in the first half, almost 10% lower than a year earlier but ahead of the £281m consensus."

And Clive Black, retail analyst at Shore Capital, told Huff Post UK: "We are pleased to see an improvement in trade in Q2 and the demonstration of very good cost control.

"However, M&S is cautious about the consumer, so we retain our present forecasts and await news of Christmas trade; even with encouraging guidance on mix and costs."

M&S won plaudits on 5 November for inviting a four-year-old boy with Down's Syndrome a starring role in its Christmas catalogue after his mother contacted the store through Facebook.

An M&S spokesperson said: “The response from our customers to Caroline’s post on our Facebook page was amazing. It really was social media at its best.

“We always look for kids who have fun in front of the camera and Sebastian was a pleasure to work with.

“Everyone involved in the shoot had a fantastic day and we’re really looking forward to seeing Sebastian in our Christmas magazine.”