Marks & Spencer's disappointing food sales sour Christmas trading

Marks & Spencer reported disappointing sales over the festive period, with UK like-for-like sales down 1.4%.

Over the 13 weeks to 30 December, M&S food LFL sales fell 0.4% in what the group blamed on the "ongoing trading pressures continued in the lead up to Christmas as consumer spending and choices reflected tighter budgets", though other supermarket groups seemed to do much better.

Clothing and home sales fell 2.8% on a LFL basis as chief executive Steve Rowe held off from discounting in the "very promotional" market and did not participate in Black Friday, which saw revenue grow both in-store and online over the weeks leading up to Christmas.

However, the impact of an "unseasonal October" resulted in an overall revenue general merchandise decline and meant more stock was carried into the December sale.

Group sales of £3.17bn were down 0.1%, as online sales grew 3.0% to £309m but international tumbled 9.8% also to £309m.

Full year profit guidance from management remained unchanged, however, with Rowe having already lowered the market's sights in November's interim results. This time he 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 underperformance in our food like-for-like sales."

For the full year, the group is forecast to deliver profit before tax of £579.6m and earnings per share of 27.84p, according to a consensus of analysts collated by Factset.

Steve Rowe says food business suffered weakness in areas where there wasn’t an “M&S plus” - e.g. more commodity items like Brussels sprouts

— Ashley Armstrong (@AArmstrong_says) January 11, 2018

“This isn’t just any retail decline, this is an M&S one," quipped Neil Wilson, analyst at ETX Capital, adding that "there could be serious question marks over Steve Rowe’s turnaround strategy".

Consensus was actually for a slighter worse set of results so he suggested shares could creep higher on Thursday with plenty of the shares being shorted by hedge funds.

"Nevertheless there is no repackaging these figures as anything short of very disappointing," Wilson said, with food a concern after being an "easy win" for years.

"Other grocers registered solid increases and crucially may be eating into M&S’s premium niche – we have seen strong performances for Morrison’s, Sainsbury’s and Tesco’s premium ranges. And Waitrose – probably its closest apples-to-apples rival in food – saw LFL sales +1.5%."