Blog: Katy AskewM&S growth target looks shaky

Katy Askew | 14 May 2012

Marks and Spencer is expected to cut its growth target when it reports its preliminary results next week.

Eighteen months ago, chief executive Marc Bolland set the UK retailer the ambitious target of increasing its sales from GBP9.7bn (US$15.58bn) in 2011 to GBP11.5-12.5bn by 2014. Sales expansion was to be generated through growth at its UK and international stores as well as online.

A weak fourth-quarter sales update last month could have put these targets into question.

In the fourth-quarter, M&S booked a significantly improved performance from its food division, which saw a 3.1% increase in revenue. And this performance looks set to continue as the firm focuses on innovation to attract more shoppers. The company has looked to shrug off its pricey image through various promotions, notably 'dine-in', to boost its food sales. And, on Friday, last week M&S launched a 'value' food range, as it attempts to take a bigger share of the weekly shop.

However, the lion's share of M&S sales come from its clothing offering, where availability issues in women's wear and poor consumer sentiment dented last quarter's numbers.

Over the weekend, reports have claimed that Bolland could be forced to climb down from his three-year sales targets, which would see revenue rise by around GBP3bn. On Tuesday week (22 May), Bolland is expected to confirm that full-year sales have risen by only GBP200m to about GBP10bn, the Daily Mail reported.

Somewhat predictably, Marks and Sparks' corporate press office declined to comment on the speculation, insisting any update would come out with its interim results.

However, one industry watcher told just-food that although in the longer-term M&S's clothing sales are expected to benefit from demographic trends such as the ageing population, the group's shorter-term targets now seem "unlikely" to be met.

Although many of these issues were flagged when the company released its fourth-quarter numbers, the market has reacted negatively to the reports and shares in the retailer dropped 11 pence this morning, to 349 pence at 11.51am. 


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