Marks & Spencer is expected to report on another difficult quarter for its beleaguered clothing arm next week, with boss Steve Rowe also tipped to update the market on plans for the retailer’s domestic and international stores.
A consensus of City analysts expect like-for-like sales at the firm’s general merchandising division, with includes clothing, to fall by 3.9% in the second quarter.
In July, Marks & Spencer revealed that its clothing arm suffered its worst sales performance for more than a decade as it cut back on promotions amid a “weak market”, with like-for-like sales plummeting 8.9% in the first three months of the year.
Mr Rowe – who took over from Dutchman Marc Bolland in April – is undertaking a wide-ranging overhaul of the business as he attempts to turn the retail giant around.
In August, Mr Rowe swung the axe on 525 jobs at the retailer’s head office in a bid to cut costs. He later embarked on a major shake-up of staff pay in an effort to mitigate the impact of the National Living Wage.
It has also been reported that he is gearing up to shut dozens of its high street shops and phase out clothing sales at select stores as part of a major overhaul.
Kate Calvert, analyst at Investec, said: “Steve Rowe will give part two of his strategic update on November 8. Having set his first priority as reviving clothing sales in May, he is due to come back to the ideal UK store estate in a multi-channel world, international, operations, and capital returns.
“We believe the market already anticipates action in all these areas and is likely to focus on weak trading and profit decline.”
Investec is pencilling in a 23% fall in half-year underlying pre-tax profits to £218 million.
Experts also expect the chief executive to reveal plans for the company’s international arm, which has more than 450 stores, with many forecasting store closures as part of a major retreat.
Ms Calvert described Marks & Spencer’s owned businesses in Ireland, Czech Republic and Greece in particular as the “main drag” on the international business.
Marks & Spencer’s better-performing food division is forecast to see growth flat line with Helal Miah, investment research analyst at The Share Centre, flagging that Christmas sales will be pivotal.
“Investors should appreciate that although impacted by price deflation, food sales are being helped by the launch of new food lines and the opening of more of the ‘Simply Food’ convenience stores, so the company will be pulling out all the stops to entice people in to buy their festive spread,” he said.
However, Mr Miah cautioned that the spectre of Brexit could emerge as a major cause of uncertainty and lead to lower economic growth, ultimately impacting consumer spending.
In July, Mr Rowe said that consumer confidence had weakened in the run-up to the EU referendum, adding: “While it is too early to quantify the implications of Brexit, we are confident that our strategic priorities and the actions we are taking remain the right ones.”
He added shopper confidence remains “fragile” after the Brexit decision, warning that Marks & Spencer is “operating in uncertain times”.
[Source:-East Lothian courier]
