The City’s attention has been on Marks and Spencer’s clothing business in recent months. The UK retailer’s fourth-quarter trading update indicated the division performed better than expected, although problems remain. However, all the while, the upmarket grocer’s food business powers along nicely.
Shore Capital analyst Clive Black
“Beyond the key focus of UK GM, we must make mention and give credit to M&S for the performance of its food operations. LFL sales growth of 4% is excellent in our view and it is pleasing to see the outperformance of the sector over the last quarter. With its exacting specifications and good reputation for high quality and provenance, M&S has maybe been a beneficiary of any customer switching surrounding the horse meat contamination in Q1 2013. However, there are broader improvements too. Recently Shore Capital visited M&S’s Handsforth Dean store near Manchester and felt it was one of the strongest food propositions that we have seen from the business for some years.
“Within the statement the key trading figure is that for like-for-like (LFL) sales in its core general merchandising (GM) categories in the UK, which came in at minus 3.8%. This figure is poor but a little better than we feared going into the statement.”
Conlumino MD Neil Saunders
“Despite the solid overall growth, there is a strong sense of déjà vu in the latest set of numbers: the polarised performance of falling clothing sales and rising food sales continues and seems to have become somewhat entrenched. Indeed, the polarisation is even sharper this quarter given the particularly robust uplift in food sales – an uplift which has saved M&S the embarrassment of a weaker set of trading results.
“The food business provides a template for how M&S should approach clothing. Here M&S is unashamedly directional; it does not try to be all things to all men. The stance, while recognising the need to provide good value for money, is strongly skewed towards the premium end of the market. Brand segmentation is clear and innovation ensures that various parts of the range are regularly refreshed. All of this is supported by a marketing effort that creates customer interest and genuinely reflects the strengths of the proposition. All of these factors have contributed to an impressive market beating performance over the last quarter.”
Robin Knight, partner at advisory firm Zolfo Cooper
“Food sales are the white knight for M&S, painting a much brighter picture than its clothing sales. With food becoming an increasing focus for the whole business, and an international expansion of its food division on the cards, the grocery department is certainly out-performing its rivals.
“Whilst today’s results are perhaps more encouraging than some expected there is still a long way to go as Marc Bolland enters the final straight of his three year plan. Amongst other things M&S needs to follow through with its pledge to increase the style and quality of its clothes and win back market share from its rivals via an enhanced store and online offering.”
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers
“It is something of a sign of the times that a previous UK bellwether should see its share price rise in early trade because the update is not as poor as had been expected.
“There has been some exasperation at the speed of the M&S revival. Competitors have continued to up the ante, with more dynamic offerings – and widely available online so that the effect of poor weather is mitigated – and have continued to power ahead whilst M&S is in catch-up mode. There are, however, some chinks of light, and the ongoing strength in food can be offset against the ongoing weakness in general merchandise.”