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M and S returns to sales growth in Q3

Wednesday, January 06 08:04:58

Retailer Marks and Spencer has posted its first rise in quarterly underlying sales for over two years.

It still missed analysts' forecasts and joined rivals in warning of an uncertain 2010.

Chairman Stuart Rose also said new Chief Executive Marc Bolland, whom the 126-year-old group poached from grocer Wm Morrison in November, was unlikely to start until the end of Spring, later than investors had hoped.

M and S said sales at UK stores open at least a year rose 0.8 percent in the 13 weeks to Dec. 26, its fiscal third quarter.

That was below analysts' average estimate of 1.2 percent and contrasts with forecast-beating numbers reported by fashion chain Next and department stores group John Lewis yesterday.

Analyst Kate Calvert at brokerage Shore Capital said the M and S statement looked "slightly underwhelming ... I would say M and S had a respectable Christmas, but not necessarily a sparking Christmas."

Britain's retailers have coped better in the recession than many analysts had feared, helped by cost cutting and the positive effects on consumer spending of sharply lower interest rates.

But economists warn taxes will have to rise, and public spending fall, in order to rein in government debt, which could hit confidence among shoppers this year.

M and S said underlying UK sales growth was nearer 2pc, adjusting for the fact that the comparable period the previous year included an extra day of the post-Christmas clearance sale.

The rise in underlying sales was the first since the second quarter of 2007-2008.

"We had a good Christmas, continuing the improvements seen throughout 2009," said Rose, flagging strong sales of knitwear, sleepwear and Christmas treats like mince pies and champagne.

"We expect the trading conditions over the coming year to remain challenging as a result of continuing economic uncertainty," he added.

Next struck a similarly cautious tone on Tuesday, warning its earnings in 2010-2011 could be flat, even as it raised forecasts for the year ending Jan. 31, while John Lewis spoke of a "long slow recovery".

(c) Reuters