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Marks & Spencer has reported an 8.4% drop in third quarter sales, with food growth of 2.2% not enough to compensate for a plunge in general merchandise sales.

Total UK sales in the 13 weeks to 26 December were down 8.2% and by 7.6% on a like-for-like basis.

Sales had been down 3.6% before the government’s tiering restrictions in November and then plunged 19.5% during that period before recovering to drop a more modest 3.6% again in December.

Food like-for-like sales increased 2.6%, with like for like sales ex-hospitality up 5.7%.

On a comparative basis M&S said this performance was even stronger given reduced food-on-the-move sales and lower footfall in town and city centres.

During the four-week lead up to Christmas like for like sales ex-hospitality and franchise grew by 8.7% with large retail park and Simply Food stores significantly outperforming.

On top of this Ocado Retail further sustained its recent positive performance with the participation of M&S products remaining strong.

However, in clothing & home good progress in repositioning ranges and shape of buy was concealed by the continuing restrictions and demand distortions. Revenues decreased 25.1% reflecting an in-store sales decline of 46.5%, partly offset by strong online sales growth of 47.5%. The sales mix remained heavily biased to Covid influenced product such as sleepwear and leisurewear.

International revenue decreased 10.4% impacted by changing restrictions across the globe.

Meanwhile, M&S said the announcement of an effective UK wide lockdown, potentially enduring until Easter “will impact store sales and we are continuing to actively manage our Clothing & Home stock and our store cost base accordingly”.

CEO Steve Rowe commented: “Given the on-off restrictions and distortions in demand patterns our trading was robust over the Christmas period. 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.

“Near-term trading remains very challenging but we are continuing to accelerate change under our Never the Same Again programme to ensure the business emerges from the pandemic in very different shape.”

M&S will report full-year results for the 53 weeks ended 3 April 2021 on 26 May.

The company’s shares are down 1% so far today to 139.9p.

Morning update

Pet care retailer Pets at Home has told the market that strong sales momentm has accelerated across all channels during our third quarter, with “high-teens” group LFL sales growth during December.

Its half year results on 24 November detailed strong sales momentum across its retail and veterinary operations during Q2 despite an extremely challenging external environment – it said this has continued in the period to 31 December.

While renewed Covid-related restrictions on a national level may constrain trade, it remains an “essential” retailer and its stores and veterinary practices will remain open.

The group now anticipates full-year underlying pre-tax profit, including the previously announced repayment of business rates relief of £28.9m, to be at least £77m, ahead of previous guidance.

It also noted its robust balance sheet and liquidity position was strengthened further at the end of 2020 through £80m in initial cash proceeds relating to the completion of the disposal of its Specialist Group.

Elsewhere, pub company Marston’s has issued a trading update for the 13 weeks ended 2 January 2021.

It said trading was “materially disrupted” during the 13-week period as Covid-19 related trading restrictions imposed across England, Scotland and Wales meant total pub revenues for the quarter were £54m.

Following the imposition of lockdowns across the UK in recent days, all its pubs are closed, with the anticipation this will be until March at the earliest.

Despite this disruption, it said it remains focused on the strategic development of the business. The joint venture between Carlsberg UK and Marston’s Beer Company completed on 30 October 2020 and it received initial proceeds of £233m used to reduce debt.

In December 2020 it exchanged contracts with SA Brain to operate its portfolio of 156 pubs in Wales, on a combination of leased and management contract arrangements.

Marston’s said when restrictions are lifted it expects consumer demand to be strong and that its pub estate, which is predominantly located in suburban locations, will be well positioned. The SA Brain transaction demonstrates its commitment to growing our pub business and its confidence in the medium-term outlook for the UK pub sector.

Despite the ongoing temporary disruption to trading, the group said it has significant liquidity following the completion of the joint venture. Bank drawings net of cash at 2 January were £104m, from a £280m facility which extends to 2024, providing bank facility headroom of £176m.

As previously reported, it estimates our cash burn in full lockdown of £3m-4m per week, before scheduled securitised payments, and “remain confident in our ability to navigate the current difficult environment”.

CEO Ralph Findlay commented: “The pub sector has been closed for much of the last nine months and remains in a very difficult position. Regrettably there have been casualties across the sector and It is vital that the Government reviews urgently the opportunity to continue to support pubs as we reopen the economy in the coming weeks.

“Pubs are viable businesses which are part of the social fabric of Britain and which make a major contribution to the economy and the communities in which they serve. It is vital that they not only survive the short-term crisis but are supported in order to recover and flourish. Extending the business rates holiday and VAT cut for the rest of this year is a minimum requirement.”

“With the roll out of the vaccine programme now underway nationwide, we remain well positioned to rebuild trading momentum once restrictions are lifted, as well as to leverage potential market opportunities open to us. We have a clear strategy in place which leaves us confident for the future of our business over the medium term.”

On the markets this morning, the FTSE 100 has edged up 0.1% to 6,861.7pts.

Yesterday in the City

The FTSE 100 continued its strong run so far in 2021, rising 0.2% to 6,856pts.

Sainsbury’s shares jumped 6.9% yesterday to 248.5p after it brought forward its Christmas trading update to inform the market that strong sales growth and improved profitability in its online operations meant full year profits would be higher than previously forecast.

Other risers included C&C Group, up 5% to 240.5p, DS Smith, up 3% to 409.3p, Imperial Brands, up 2.7% to 1,638p, Bakkavor, up 2% to 83.4p, Diageo, up 1.4% to 2,989p, Marks & Spencer, up 1.3% to 141.4p and WH Smith, up 1.3% to 1,555p.

Pets at Home was down 3.6% to 417.6p ahead of this morning’s trading update. Other fallers included Glanbia, down 3.2% to €10.37, Nichols, down 2.9% to 1,240p, McBride, down 1.8% to 85.4p, Hilton Food Group, down 1.8% to 1,092p and Naked Wines, down 1.6% to 660p.

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