() has reported a better than expected fall in sales in both food and general merchandise over the pre-Christmas quarter, but warned of added headaches from potential tariffs on EU products and the “very complex” admin processes post-Brexit.
With a high proportion of stores in the sort of city centre locations that have been hit hardest by the effect of the coronavirus pandemic, sales of £2.8bn were generated for the 13 weeks to December 26, 2020, were down 8.4% compared to the same period last year.
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Food sales, which were boosted by a strong performance from the Ocado Retail joint venture, rose 2.6% on a like-for-like (LFL) basis to £1.7bn, with 5% and 4.4% growth either side of the national lockdowns in November but down 4.5% under those restrictions.
The Clothing & Home department, with a sales mix that was heavily biased to pandemic trends such as sleepwear and leisurewear, recorded revenues of £787mln, down 24.1% compared to last year on an LFL basis. While in-store Clothing & Home sales declined 46.5%, online sales jumped 48% to £353mln.
“Given the on-off restrictions and distortions in demand patterns our trading was robust over the Christmas period,” said M&S chief executive Steve Rowe in the trading update.
“More importantly beneath the Covid clouds we saw a very strong performance from the Food business including Ocado Retail and a further acceleration of Clothing & Home online.”
Reaction and analysis
The shares fell 2% to 138.55p by late morning.
“The bigger supermarkets we’ve heard from enjoyed much brighter sales than this high street giant,” noted analyst Sophie Lund-Yates at Hargreaves Lansdown.
“The bright spot comes from the strong demand seen in M&S’ retail park and Simply Food stores. This is significant because it means Marks & Spencer’s food proposition is working and is a true asset to the business, but sales are having their wings clipped by the old adage: location, location, location.”
She said the greater impact on Clothing & Home from coronavirus lockdowns included a disappointing rise in online sales, “which, while seriously improved, haven’t reached the heady heights others have reported. This is likely a function of two things – the first being M&S was behind the curve when it came to online, so has been playing catch up infrastructure-wise. The second, we suspect, is M&S customers prefer traditional shopping, and are perhaps less likely to transfer online.”
Analysts at UBS noted that the total UK sales decline of 8.2% and 7.6% on an LFL basis compared to a City consensus forecast for an 11.2% collapse, with Food LFLs having expected to rise 2.1% C&H LFL to have dropped 31.3%.
House broker Shore Capital said: “Lockdown 3.0 will negatively impact Q4 FY02021 trading (c£25m per month), but the group is progressing at pace, we note a clean stock position and the successful £300m bond issue; year-end…
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