On the money: Marks & Spencer upbeat on food performance
Food sales a bright spot for M&S
Marks & Spencer has remained upbeat about the performance of its food division despite a slowdown in like-for-like sales.
The retailer this morning (10 January) saw its shares slide by around 5% today after it reported a 1.8% fall in like-for-like UK sales for the 13 weeks to 29 December.
Food sales were held up by a record Christmas trading period for the unit, with like-for-like sales up 1.1%. This compares to 0.6% growth in the first quarter and 1.6% in the second.
Speaking on the retailer's earnings call this morning, CEO Marc Bolland said the food business "continued to perform strongly", despite suggestions from an analyst that it had had its weakest quarter.
"If you take the true like for likes, you have to factor in what people also brought in as extensions and space for the last year. If you look at the true like-for-likes that we are delivering, we delivered not much space growth. So what we do is a real true like-for-like."
Bolland said the last two weeks "played an important role" in the performance of its food division.
"In these last two weeks we had an absolutely smashing result and if we add up the two years with each other, we are even pleased with the like-for likes, which again, compared to some other retailers ... most other retailers in food put down about 6-7% if not more space per year. And that would count as like-for-likes 12 months later. We put down 2.5%, so if you deduct 3.5% off last year's space into most retailer numbers then you come up with a different number."
Bolland added that Marks & Spencer's inflation in the period was flat compared to most retailers, which have food inflation at around 4%.
"What we actually did was grow volume where others didn't grow volume," Bolland said. "If you take these factors into account, if you do the simple maths, others do 4% of food inflation, we are sort of zero and if you add it up with the space people added last year and then take the like-for-like, you will see in these days, in food retailing ... our total number has been strong."
Bolland cited two reasons for this: not selling branded products, therefore not being "bound" to price raises of third parties, and selling more of what it calls "value added products".
"Our input pricing is far lower, it is at a far lower level than what you would see at a supermarket."
According to BRC figures release this week, food inflation fell to 4.1% in December from 4.6% in November due to an easing of global commodity costs.
Shore Capital anlayst Clive Black said he expects food price inflation to remain "in the system at reasonably full levels", so inhibiting industry volumes as incomes remain under pressure and helping to sustain high promotional participation by the trade.
Marks & Spencer was forced to publish its results yesterday evening - ahead of schedule - after figures were leaked to Sky News.
Addressing the conference attendees last night, Bolland apologised for the early release of the results that had forced it to seek legal advice.
"That gave us the clear guidance to bring out the full statement tonight to you. I have to stipulate this has nothing to do with things like profit warning and panic on our side. We were fully prepared for you tomorrow but we wanted to make sure you got the full information rather than information from news wires, speculation or Sky."
Bolland was also forced to defend his position as CEO after he was questioned on the call as to whether he would remain with the retailer this year.
"I can insist t I will be there [with the company]. I have full confidence in the team ... we have had a stellar performance."
Finance director Alan Stewart said Marc has "the full support of the board", adding "the shareholders supportive of the strategy."
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