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April 17, 2012

UK: Grocery shines but non-food dents M&S sales

An increase in Marks and Spencer's food sales was not enough to offset lower revenues elsewhere in the business, leading the UK retailer to today (17 April) report falling underlying domestic sales.

By Dean Best

An increase in Marks and Spencer’s food sales was not enough to offset lower revenues elsewhere in the business, leading the UK retailer to today (17 April) report falling underlying domestic sales.

M&S booked a 0.7% drop in UK like-for-like sales for the 13 weeks to 31 March, the fourth quarter of its financial year.

Food sales increased 1% on a like-for-like basis but sales from M&S’s general merchandise division fell 2.8%.

Total UK sales grew 1.2% thanks to a 3.1% increase in food sales. General merchandise sales were down 2.8%.

The retailer’s decision to no longer sell technological products hit sales of home products, while a shortage of its best-selling womenswear lines weighed on clothing sales.

However, M&S insisted its food business “performed very well in a very competitive market and against tough comparatives”. It pointed to the launch of 500 products in the quarter and claimed it held the “highest share of the market for healthy eating”, with its Simply Fuller Longer range as market leader.

The retailer reported a fall in sales outside the UK. M&S said its international sales fell 2% as difficult trading conditions in Ireland and Greece, as well as the restucturing of its business in Central Europe, hit its overseas division. In total, group sales increased 0.8%.

M&S reports its full-year financial results next month and said it was “confident of delivering profits in line with expectations”.

It provided some guidance for the next financial year and said gross margins would be at worst flat on the year or at best up 25 basis points.

The retailer said it would roll out its new-look UK stores to the rest of the network in the country. It claimed the programme would cost GBP500m, GBP100m less than initial expectations.

Shares in M&S were down 2.96% at 356.8p at 09:37 this morning.

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