Marks & Spencer Group Plc, the U.K.’s largest clothing retailer, reported sales growth that missed some estimates because of stagnant general-merchandise revenue and said the industry outlook remains difficult.
Sales at U.K. stores open at least a year rose 1.7 percent, excluding value-added tax, in the 13 weeks ended July 2, the London-based company said today. The median estimate of eight analysts compiled by Bloomberg was 2 percent.
Same-store sales of general merchandise, which includes clothing and home-furnishings, were unchanged, missing the median analyst estimate of 1 percent growth. Finance Director Alan Stewart said the quantity of goods sold fell as Britons bought smaller numbers of more-expensive items. U.K. revenue growth came solely from food, where same-store sales rose 3.3 percent after the introduction of more than 500 new items.
“The coming quarter and coming half-year will be a very challenging one,” Chief Executive Officer Marc Bolland said on a conference call today, citing pressure on consumers’ disposable incomes and increased commodity prices.
Marks & Spencer fell 2.5 percent to 363.8 pence at 4:35 p.m. in London. The shares have slipped 1.4 percent this year.
General merchandise sales were “disappointing,” said John Guy, an analyst at Royal Bank of Scotland in London. Business should have been boosted by a two-week earlier start to the retailer’s summer discount period, he said.
Bolland said the decline in clothing and home-furnishing volume was down to the weakness of the overall retail market.
Marks & Spencer’s “better and best” lines outperformed its “good” priced lines, the CEO said, Customers bought new products such as body-shaping swimwear, where sales climbed 50 percent, and 49.50-pound ($78.95) maxi dresses, he said.
The retailer said its share of the U.K. food market increased by 0.1 percentage point to 3.8 percent. New products introduced in the quarter included ‘Simply, Fuller, Longer’ ready-meals and a broader healthy-eating range.
Online revenue rose 13 percent, while international sales climbed 7.8 percent in the quarter, the company said. Bolland plans to expand online and in markets outside the U.K. to reach sales of 12.5 billion pounds by fiscal 2014.
The retailer, which hosts its annual general meeting in London today, didn’t change its forecast for gross margin in fiscal 2012 to be as much as 25 basis points higher than last year. Average selling prices rose 7 percent in the quarter due to a “touch more” price inflation and consumers buying more of the company’s higher priced lines, Stewart said.