Marks and Spencer endures mixed fourth quarter as clothing division struggles

Marks & Spencer's overall sales grew in the fourth quarter of its financial year thanks to a strong performance in the food division, but there was room for improvement in the clothing department, the retailer said on Thursday (7 April).

The FTSE 100 group said overall sales in the three months to grew 1.9% year-on-year, driven higher by a 4% increase in food sales. Like-for-like sales in the food division were flat but outperformed sales in the clothing and home division, which fell 1.9% year-on-year on a reported basis and 2.7% on a like-for-like basis.

Despite an increasingly competitive market, the group said the food business had continued to outperform its rivals and M&S opened 80 new stores in the year, which saw its market share grow to 4.3%.

"Marks and Spencer now takes £1 out of every £25 spent on food in the UK, putting it in the same basket as players like Aldi, Lidl and Waitrose," said Laith Khalaf, senior analyst at Hargreaves Lansdown.

"This is testament to how well their food business has grown, with 80 new stores opened over the last year.

"It also shows how the big supermarkets in the middle have been squeezed by the likes of Aldi and Lidl at the discount end of the market, while M&S and Waitrose have applied pressure at the premium end of proceedings."

However, the clothing and home division faced a challenging backdrop characterised by price deflation and a flat market and the group said it began to reduce the proportion of sales on promotional discount and will continue to do so as it heads into the new financial year.

"Although the sales decline in clothing and home was lower than last quarter, our performance remains unsatisfactory and there is still more we need to do," said group chief executive Steve Rowe. "Turning around our clothing and home business by improving our customer offer is our number one priority."

M&S added that total UK sales increased 1.6% from the corresponding period in 2015, although they declined 1.1% on a like-for-like basis, while international sales grew 3.8% year-on-year.