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Marks & Spencer (MKS) has reported a 0.9% fall in like for like food sales in the first quarter as it continues to struggle in its clothing and home division, which saw like for like sales plunge 8.9%.

Group sales were up 1.3% in the 13 weeks to 2nd July as total food sales rose by 4% during the period. The like-for-like drop was partly driven by the timing of Easter, which accounted for 0.5 percentage points of the fall.

“We strongly outperformed the food market and continue to leverage our volume growth to reinvest in price,” M&S said. “New Simply Food stores continue to perform ahead of our expectations.”

Total clothing and home sales were down by 8.3% in a “weak market”. During the period it continued to reduce the number of promotional events during the quarter, including just one ‘cyber day’ compared with six last year. It added it has repriced around 1,000 lines since January and is “pleased with early results”.

International sales were up 0.7% at constant currency and rose 6.1% on a reported basis.

Steve Rowe, chief executive, said: “A key part of our recovery plan for Clothing & Home is lowering prices and reducing promotions. As a result, we ran fewer price promotions while continuing to lower prices to deliver real value to our customers, and moved the summer sale to July. We knew our actions would reduce total sales but we are seeing some encouraging early signs. Our Food business continues to strongly outperform a deflationary market, with LFL sales slightly down when adjusted for Easter timing.

“As highlighted in May, consumer confidence weakened in the run up to the EU referendum. While it is too early to quantify the implications of Brexit, we are confident that our strategic priorities and the actions we are taking remain the right ones to deliver results for our customers and our business.”

M&S shares have fallen a further 1.8% to 288.7p so far this morning on top of falls earlier this week. M&S is now down almost 11.5% over the past five days of trading.

Morning update

Associated British Foods (ABF) has issued a trading update for the 40 weeks to 18 June 2016 stating that the Brexit-inspired fall in sterling has meant it no longer expects a full-year decline in earnings.

ABF said revenues are 3% ahead of the same period last year at constant currency and 1% at actual exchange rates. It said these figures reflect stronger growth in the third quarter of 4% at constant currency and 7% at actual exchange rates.

“The underlying operating performance of the group during the third quarter was ahead of our expectation, with an improvement in our sugar business,” it said. “In the third quarter, sterling was weaker against most of our major trading currencies compared with the same period last year, resulting in a translation benefit. Following the result of the EU referendum, sterling has weakened further and at these rates we expect a bigger translation benefit in the final quarter with no material transactional effect.”

“As a result, our outlook for this financial year has improved and we no longer expect a decline in adjusted earnings per share for the group for the full year.”

ABF said its grocery business continued to make progress in the third quarter with “some improvement in revenue growth” and Twinings Ovaltine performing well in UK, US and Thailand and sales volumes at Allied Bakeries well ahead of last year.

Revenue for AB Sugar was higher than last year at constant currency as a reduction of EU stock levels and, more recently, an increase in world sugar prices have resulted in a strengthening of European sugar prices.

Sales at Primark in the year to date were 7% ahead of last year at constant currency driven by increased retail selling space. Sales at actual rates in the quarter benefited from sterling weakness and so are now also 7% ahead.

Beer and cider producer C&C Group (CCR) has issued a trading update for the period from 1 March 2016 to the date and talks of having made a “solid start to the year across core markets”.

Brand volumes in the first quarter represents are considerable up on the trends of last year, with Bulmers up 9%, Tennent’s GB 5%, Magners GB up 24% and Export up 24%.

It said in in Ireland, some decent weather in March and May gave the cider category an early boost and the Bulmers brand enjoyed the benefit. There is momentum in the Corona brand and its wine portfolio and boutique beer range are beginning to perform.

After a “very challenging” year in 2015, the licensed on-trade in Scotland is experiencing a more stable start to 2016. Tennent’s began to recover some lost share in the independent free trade in the first quarter.

The recovery of the Magners brand in GB, evident in the second half of its 2016 financial year, continued in the first part of the new year. The significant up-weighting of investment through the ‘Hold True’ above the line campaign and the recently completed repackaging of the brand, “should ensure that the momentum continues into the second half of the year”. At the boutique premium end of the portfolio, Menabrea saw growth of 88% in the on-trade in England and Wales.

In terms of outlook, C&C said: “The European Championships in France has been good for trade across Ireland in June and we anticipate a decent month for our brands.”

“Despite the solid start, we remain cautious on our outlook for the year… We have a growing export business which is entirely unaffected by the UK decision to leave the EU and our conservative approach to currency risk covers most of our transaction exposure through natural hedging. However, with almost 50% of profits denominated in Sterling and reported in Euros, C&C is exposed to the translation impact of a devalued Pound. At current levels, if sustained, currency movements have the potential to undo the earnings benefit from both cost reduction activity and the steady progress made in trading year-to-date.”

“While the longer-term economic implications of the UK referendum outcome are uncertain, the fundamentals of our brands and business model remain strong, supported by a robust balance sheet and cash conversion capability.”

Elsewhere, Danone (BN) has announced this morning it has agreed to buy US food group WhiteWave Foods for US$12.5bn is a $56.25 per share, all-cash deal.

The price represents a premium of approximately 24% over WhiteWave’s 30-day average closing trading price ($45.43), with the deal expected to close bycthe end of the year, subject to various approvals.

WhiteWave is a global company which generated $4bn in sales in 2015 and has a portfolio of large and leading branded platforms in North America and Europe in high-growth, on-trend food and beverage categories which focus on premium organic dairy, non-GMO, plant-based alternatives to milk & yogurt, fresh foods, and coffee creamers.

Emmanuel Faber, Danone CEO said: “This unique combination positions us better to address tomorrow’s consumer trends and represents a great opportunity to step change the ambition of our plan for an alimentation revolution and to accelerate our path towards strong sustainable and profitable growth by 2020.

“It will allow us to enhance Danone’s growth profile and reinforce our resilience through a broader platform in North America. We are convinced that combining with WhiteWave will create significant value for all of our stakeholders.”

The FTSE 100 has recovered 1.6% to 6,564.3pts so far this morning.

ABF has leapt 7.6% on its earnings upgrade to 2,748p this morning, while most other major fmcg stocks are in green.

The supermarkets have edged up from yesterday’s falls, with Sainsbury’s (SBRY) up 2.3% to 219.5p, Tesco (TSCO) up 1.3% to 163.7p and Morrisons (MRW) up 2.2% to 176.1p.

C&C Group is up 2.8% to €3.58 so far this morning, while Danone is up 6% to €67.15 after the announcement of its WhiteWave deal.

Yesterday in the City

The suggestion that Asda is plotting a new price war hammered supermarket shares yesterday.

HSBC suggested yesterday that incoming CEO Sean Clarke has Wal-Mart’s backing to invest in price to regain market share and that would hit the sales and earnings of its big four contemporaries, including downgrading Tesco from buy to hold and cutting the price target on all three listed grocers.

Tesco (TSCO) fell 8.1% back to 161.6p during the day, while Morrisons (MRW) was 7.2% down to 172.4p and Sainsbury’s (SBRY) dropped 3.7% to 214.6p.

It was another more downbeat day in the City in general, with the FTSE 100 down 1.25% to 6,463.6pts.

Other fallers included Greggs (GRG), down 3.2% to 897p, British American Tobacco (BAT), down 2.7% to 4,900p, Greencore (GNC), down 2.3% to 292.6p and B&M European Value Retail (BME), down 2.3% to 233.6p.

The day’s few risers included Cranswick (CWK), up 1.7% to 2,187p, Booker Group (BOK) after its solid first quarter update yesterday, up 1.3% to 166.5p and SSP Group (SSPG) up 1% to 281.4p.

Drinks firms Fevertree (FEVR) and AG Barr (BAG) were also up yesterday, rising 3% to 706.5p and 2.8% to 481.1p respectively

Stevia producer PureCircle (PURE) was down 5% to 311.7p despite saying yesterday d it expects sales in the year to 30 June to be not less than $138m, an increase of 9% on the previous 12 months.

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