M&S warns of more gloom to come for the high street despite record Christmas food sales

Middle England's favourite retailer Marks & Spencer warned of 'tough conditions ahead' despite record food sales boosting Christmas trading.

Britain's biggest clothing chain used yesterday's festive update to sound a note of caution about rising cotton prices and the recent hike in VAT from 17.5 per cent to 20 per cent.

Chief executive Marc Bolland said: 'We have been consistently reporting, in our outlook for this year, that the government spending cuts will not make the life of customers any easier.

On at M&S

On at M&S;

'We have highlighted the fourth quarter will be difficult because of strong comparatives, the impact of commodity pricing, and VAT.'

The gloom sent shares sliding 3 per cent and overshadowed a solid performance, which saw underlying sales rise 2.8 per cent for the 13 weeks to January 1.

Food was a strong performer, up 1.8 per cent, as Bolland shook up the shelves with 600 new lines and scored big hits with Christmas desserts and party food.

 

A television campaign featuring Caroline Quentin hosting a party helped drive sales, and M&S (down 10.80p to 373.20p) gained market share as shoppers quaffed its half price champagne and took up its 'deals of the week' promotion.

M&S expects food price inflation of around 1 per cent to 2 per cent in the final quarter, and said it was focused on maintaining accessible entry prices for most of its clothing ranges.

Shivering shoppers snapped up jumpers, boots and thermal underwear driving underlying sales growth of 3.8 per cent in non-food.

But the cold snap also had a negative effect as customers struggled to make it to stores despite M&S ordering double the amount of grit and buying snow ploughs and bobcat snow moving machines.

Bolland said this cost the group around £55m in lost sales. Analysts pointed out the update was flattered by the timing of the winter sale which was included in the figures.
M&S was not the only retailer posting good news.

Topps Tiles (up 1.25p to 79.5p) surprised with a 2.2 per cent rise in underlying sales, in line with forecasts, for the last 13 weeks as it bucked the trend of retailers hit by the snow.

Chairman Barry Bester said: 'We experienced some disruption during December from the extreme weather conditions and I feel the business has responded well during a testing period.'

But it was a different story at homewares chain Dunelm (down 30.5p to 498p) which said sales fell 1.2 per cent in the 26 weeks to January 1 blaming 'external factors'.

  • For more on Marks go to thisismoney.co.uk/mks


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