Marks & Spencer saw shares slump after it revealed another steep fall in clothes sales and disappointing festive trading in its food halls as it failed to lure in cost-conscious shoppers.
The high street bellwether blamed a mild October for a 2.8% fall in like-for-like clothing and home sales over the 13 weeks to December 30, while it said “ongoing under-performance” in its food arm left sales 0.4% lower.
Shares tumbled nearly 7% amid wider falls in the retail sector after sales growth at supermarket giant Tesco missed City expectations.
Chief executive Steve Rowe is leading turnaround efforts to boost sales and profits at the chain (M&S/PA)
M&S said a pick-up in trading over the key Christmas weeks helped offset a difficult start to the quarter, with consumer spending under pressure amid a squeeze on budgets from inflation.
Chief executive Steve Rowe said: “M&S had a mixed quarter with better Christmas trading in both businesses going some way to offset a weak clothing market in October and ongoing under-performance in our food like-for-like sales.”
The sales falls were not as bad as feared, although this failed to allay concerns in the City.
Mr Rowe sought to assure that the clothing arm was still turning around and would have seen sales rise in the Christmas quarter had it not been for the unusually warm October.
But he admitted the group had “a lot to do to get our business back on track” having disappointed with its food performance once more despite rivals enjoying a sales boost from rising inflation.
M&S slashed prices on 200 lines before Christmas, but Mr Rowe said the group had not been competitive enough on everyday lines.
While premium sales fared well, it suffered on sales of produce such as Brussels sprouts as consumers on “tighter budgets” defected to rivals.
The update sees the group join the list of festive casualties following recent profit warnings from the likes of Debenhams, Moss Bros and Mothercare.
M&S said it held off from slashing prices despite intense competition and saw sales grow both in store and online in the weeks leading up to Christmas.
It also shunned the Black Friday discount frenzy in November, but said the tough October left overall sales lower while it was also left with more stock to shift in the post-Christmas sales.
Overall, its third quarter like-for-like sales were 1.4% lower.
Online sales at M&S.com lifted 3%, while its ongoing move to pull out of international markets saw overseas sales slump 9.8%.
The festive sales fall comes after it gave hope last November that its turnaround was gaining traction in the embattled clothing and home division, when second-quarter sales dipped by just 0.1%.
Mr Rowe said he was pushing on with his turnaround after speeding up plans in November to close under-performing clothing stores and slow expansion of its Simply Food chain.
It also announced earlier this week that it would outsource more than half of its 430 IT roles under a technology overhaul that will save around £30 million a year.
Laith Khalaf, senior analyst at Hargreaves Lansdown, branded it a “disappointing set of figures” from M&S.
He said: “In recent years the food business has been the bright light of the M&S empire, but its glow has definitely dimmed of late.
“That’s probably a result of consumers tightening their belts when it comes to grocery shopping, and the strong performance of supermarket premium ranges suggests when customers are splashing out, they are increasingly doing it at Sainsbury’s, Tesco and Morrisons rather than at M&S.”