July 9 (Bloomberg) -- Marks & Spencer Group Plc, the U.K.’s largest clothing retailer, said general merchandise sales fell for the eighth consecutive quarter, increasing pressure on the company to have a successful autumn-winter collection.
U.K. sales at stores open at least a year in the clothing and home division fell 1.6 percent in the 13 weeks ended June 29, the London-based retailer said. That compares to the median estimate of 12 analysts compiled by Bloomberg for a 1 percent decline. Sales in the food division climbed 1.8 percent on the same basis, in line with the median analyst estimate.
Marks and Spencer is betting on a revived autumn-winter fashion range that comes into stores from July 25 with enhanced quality. The first-quarter performance was impacted by a “very difficult” April, a more stable May and highly promotional June which it had to respond to with discounts like half-price, Bolland said on a conference call with journalists. The company lost some market share as a late summer weighed on sales of casual tops and bottoms, he said.
“There is pressure on the forthcoming autumn-winter range to make progress for M&S,” said Clive Black, an analyst at Shore Capital. The first-quarter performance in general merchandise “remains a disappointing, albeit in-line, figure to our minds with M&S still losing share.”
The stock fell as much as 2.5 percent and traded 1.7 percent lower at 452.10 pence at 11:32 a.m. in London trading. The shares have climbed 18 percent this year.
M&S also struggled with what the British Retail Consortium has said was “topsy-turvy temperatures” in May, with a cold end of month hurting seasonal fashions. The ad campaign for the autumn line will start in September. The retailer has generated 53 percent of its annual revenue in the second half of the past three fiscal years, according to Bloomberg data.
Bolland has overseen two years of falling earnings as he ramped up spending on store formats, clothing quality and computer systems in an effort to boost sales. The company in May said it will begin to reduce investment after he spent the first three years of his tenure allocating money to try to bring the retailer in line with rivals in areas such as online sales.
“This is a step-by step approach,” Bolland said, without giving a timeline on when he expects the company will reach positive same-store sales in general merchandise. Consumer confidence held for the third consecutive month, he added.
Demand for food items around special occasions drove gains in the unit, Bolland told journalists. Still, Jamie Merriman, an analyst at Sanford C. Bernstein, said recent data points to a “lower outperformance of the market by M&S,” with Kantar data showing a contraction to 2.2 percent outperformance compared to the overall U.K. grocery market.
“Given the challenging trading conditions, we remain cautious about the outlook and continue to manage the business tightly,” the retailer said.
Smaller competitor Debenhams Plc reported a similar impact from cooler temperatures last month with revenue weakening in its third quarter as another period of cold weather and a tough consumer climate reduced spending on spring and summer fashions.
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