CEO Marc Bolland under pressure after potentially damaging figures are released almost 12 hours ahead of schedule
Marks & Spencer was on Wednesday night forced to admit to a bigger than expected drop in Christmas sales in a hastily arranged trading statement forced out after the stock market had closed.
After a potentially damaging leak of the figures, the retailer published the official numbers almost 12 hours ahead of their scheduled release of 7am on Thursday and left Marc Bolland, the chief executive, facing questions about his continued tenure at the helm of the retailer.
Bolland, who joined with much fanfare from WM Morrison supermarket chain three years ago, admitted that sales of general merchandise, which includes clothing, were “not yet satisfactory” but denied the 3.8% fall in the 13 weeks to 29 December was “disappointing”.
Neither was it a profits warning, he added. The City had expected sales to fall but not by as much.
M&S, which was hit by speculation last summer that it could be the target of a takeover bid because of its struggling performance, said overall sales were down 1.8%, as the food business had reported like-for-like sales from stores open more than a year up 0.3%.
Retail analyst Nick Bubb said the fall in sales was “much worse than rivals” such as Debenhams, Next and John Lewis, which he said was a reflection of “the strength of competition that M&S faces and the weakness of its ranges and instore merchandising”.
But Bolland insisted that while sales were down, he had decided to protect the group’s profit margins rather than embarking on major promotions during the key shopping period when 7% less had been put on promotion.
Heavy discounting by other retailers – Gap cut some prices by 70% ahead of Christmas – had not been copied by M&S as it is “not good for the brand”. He said: “We’re not going to price promote ourselves for the last decimal point [of sales].”
When asked about his future, Bolland responded: “I can insist I will be there.” Finance director Alan Stewart said Bolland had the “full support of the board” and shareholders were also supportive. Bolland said M&S had a “very aligned board and strongly aligned management team”.
He insisted the food business had performed very well, with record sales over Christmas, although the group painted a cautious outlook for 2013.
“We expect the pressure on consumers’ disposable incomes to continue in 2013. As a result we remain cautious about the outlook for the year ahead. Our plan is to transform Marks & Spencer from a traditional UK retailer to an international multi-channel retailer. We are making good progress against this plan,” he said.
But it remains to be seen whether the turnaround will be too slow during what is proving to be a challenging period for M&S whose first half profits, published in November, fell for the second year in a row after womenswear sales disappointed.
At the time Bolland promised the clothing ranges would become “much more stylish and more trend-driven”.
While this did not appear to have happened in time to attract shoppers over Christmas, he stressed that partywear sales rose 36% in the period. He has previously said it could take until July for the full effects of the new team to become apparent in stores.
On Wednesday night Bolland said the new team brought in to oversee clothing, including Belinda Earl, a former Debenhams boss, had been focusing on taking “full-price sales”.
The new team was now managing stocks tightly, “resulting in slightly less stock into the Christmas sale, and a clean position at the end of the quarter”.
He said the spring/summer collection – just arriving in stores – was being “well received by the fashion press”.
Over the two key Christmas trading weeks M&S had record food sales of nearly £330m and outperformed the market by 4%. Adding the extra week to 5 January, to New Year’s trading on a comparable basis, total sales were up 0.9%, while over two years growth was 7.3%.
“In an inflationary market, we held our average prices level on last year, giving customers great value at a time when they are managing their budgets carefully,” M&S said.
Analysts will now be deciding whether to downgrade their profits forecast – where the current lowest end of estimates is around £665m for when the full year figures are published in May.
Bubb said: “The impact of the disappointing M&S clothing sales will be largely offset by the robust gross margins and extra cost savings, so full-year profit forecasts are unlikely to drift much beyond the bottom end of the current market range.”