M&S Clothing and General Merchandise Sales Drop in the Fourth Quarter

  • CEO Rowe seeks style improvements, better product availability
  • Clothing sales fell less than expected in fourth quarter

Marks & Spencer Group Plc’s new Chief Executive Officer Steve Rowe said he’s dissatisfied with the company’s shrinking clothing sales and more has to be done to retain customers who are flocking to the retailer’s rivals.

“In clothing, customers have told us we are not as stylish as we need to be and that we’ve not had the product availability that they wanted," Rowe, who’s in his first week on the job, said on a call with reporters.

Same-store sales of clothing and home goods fell 2.7 percent in the 13 weeks ended March 26, the London-based retailer said in a statement Thursday. While the drop extended a slump that now stretches back four years, analysts had expected a decline of 3.5 percent.

“These numbers were achieved under the last CEO, so it’s like looking in the rear-view mirror," Tony Shiret, an analyst at Haitong Securities, said by phone. “With a new CEO it’s all to play for." M&S shares rose 1.3 percent to 425.90 pence at 9:35 a.m. in London.

M&S’s U.K. clothing market share has dipped to 9.9 percent while Next’s has risen to 7.3 percent.

Source: Kantar data published in Bernstein note

Rowe’s first major decision as CEO this month was to maintain oversight of the clothing business that he’s run since July. In that time, he hired British fashionista Alexa Chung to create a new collection while bringing the company’s women’s wear, lingerie and beauty teams together into one group.

The 27-year company veteran’s top priority is to stop the defection of the chain’s customers to rivals Next Plc and Primark, who have been eroding the market leader’s position.

While preventing further corrosion of the M&S clothing brand won’t be a quick or easy process, as an M&S “lifer" Rowe may be “distinctively positioned" to make the necessary changes, Clive Black, an analyst at Shore Capital, said by e-mail.

Rowe’s task isn’t made any easier by a U.K. clothing market he described as “exceptionally competitive," as well as waning consumer confidence amid weakening global growth and the pending British vote on its membership in the European Union. Next CEO Simon Wolfson last month equated the environment to “walking up the down escalator.”

M&S’s food and drink business continues to be a relative bright spot. In a U.K. grocery market bereft of growth, same-store sales were unchanged in the quarter.

Rowe plans to lay out his strategy for M&S in greater detail at the company’s annual results in May.

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