Shares in UK retailer Marks & Spencer plunged more than 20% this morning (2 July) after the company said weakening consumer confidence had hit sales.
M&S said underlying UK sales had slipped 5.3% during the 13 weeks to 28 June, with food sales down 4.5%.
The performance was blamed on a decline in consumer confidence but M&S has moved to reshuffle its management team and the company’s director of food, Steven Esom, is leaving with immediate effect.
John Dixon, director of the M&S home furnishings and M&S Direct businesses, has been appointed to replace Esom.
M&S chairman Sir Stuart Rose said market conditions in the UK had become “more challenging”. The company’s clothing business was holding market share, Sir Stuart said, but fierce price competition from rival grocery retailers had hit food sales.
“In this quarter, pressures on consumer spending and increased competitor pricing and promotional activity, coupled with changes in consumer buying patterns, have resulted in a significantly weaker performance,” Sir Stuart said.
At the company’s full-year results announcement in May, Sir Stuart warned that the UK retail sector would be “tough” this year and outlined a series of measures to boost margins, including GBP50m (US$x) in cost-savings.
Today, Sir Stuart reiterated that cost control remained central to his strategy of steering M&S through the economic storm hitting the UK retail sector.
“We expect market conditions to continue to remain difficult and we are managing our business accordingly,” he said. “As we said in May, tight stock control and management of costs are a priority. We continue to expect gains in bought-in margin, although the outturn on gross margin is difficult to predict and will depend on market conditions and our trading stance. Our guidance on operating costs remains unchanged.”
Sir Stuart added: “Four years ago, M&S was a weak business in a strong market. Today, we are a strong business in a weak market.”