Mounting inflation, a late Easter and the surprisingly warm British weather have swollen grocery sales growth in recent months, so the market was left distinctly unimpressed this week by Marks & Spencer’s first quarter organic sales fall.
Its grocery like-for-like sales fall of 0.1% in the 13 weeks to 1 July was considerably better than the 2.1% grocery slump in the previous quarter and new store openings meant total food sales were up by 4.5%. But Easter alone provided a 0.7% boost during the period and every analyst had expected some measure of like-for-like sales growth.
M&S has long been pilloried for its weakness in general merchandise. Clothing sales were down 1.2% on a like-for-like basis, but this marked a significant improvement from the 5.9% drop.
Retail analyst Nick Bubb added: “It would be ironic if M&S Food starts to go wrong just as M&S clothing starts to come right. Blips can become trends and the City wisely took the precaution of marking the shares down yesterday.” Canaccord Genuity called the grocery performance “puzzlingly disappointing”, adding: “While inflation has emerged in food retailing in the UK, it doesn’t seem to have helped much here and we would fear that this is a minor market share loss.”
The weak performance in food caused the shares to slump by 4.7% back to 323.1p - its worst day of trading for six months. The shares recovered slightly back to 325.5p by Thursday lunchtime but remain around 17% down since mid-May.
Elsewhere, B&M European Value Retail recorded its strongest first quarter of like-for-like growth in three years. Revenues rose 18.3% to £656.3m in the three months to 24 June, with UK sales up 17.8% and by 7.3% on a like-for-like basis.
HSBC said the results highlighted “two key attractions of B&M’s model: its ability to flex its range to trade seasons aggressively, and its value-based offer that is increasingly attractive to customers during tougher times”. The shares jumped more than 4% in the morning trading on Wednesday, but settled to close 1.6% higher at 340.6p - still up by about 23% so far in 2017.
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