The UK retail giant’s general merchandise sales in the 13 weeks to December 31 were described as "disappointing" with clothing sales edging up just 1.1% and homewares tumbling 13.3%, a sharp decline blamed on the decision to pull out of consumer electricals. Together, general merchandise same-store sales were down 1.8%.
However, the retailer also reported better than expected Christmas food sales with comps up 3%. That meant total UK same-store sales rose 0.5% excluding VAT. Total UK sales, excluding VAT, advanced 1.8%.
Direct sales surged 22.4% and international sales were up 8.1%, reflecting continued growth in the priority markets of India and Shanghai, as well as in its franchise business, the retailer said, noting its new Paris flagship “had a very good start".
M&S still expects annual profits to be in line with market expectations of around £700m but said those retaliatory clothing promotions resulted in "lower gross margin" than previously indicated with the profit shortfall to be made up by cutting costs.
M&S chief executive Marc Bolland said the company had performed well in a "challenging" trading environment: "Our food business performed very strongly as customers enjoyed our new and traditional Christmas products."
“In clothing our focus was on offering our customers real value at a time when they’re managing their budgets carefully. Our trading strategy worked well, delivering a record performance in many categories including menswear and sleepwear," he noted.
Economic uncertainty means the retailer expects trading conditions to remain tough this year. "We continue to be cautious about the outlook for the year ahead," said Bolland, adding he was a "glass half full man" with the Olympics and Diamond jubilee celebrations expected to boost sales.
M&S said it continues to be cautious about the outlook for the year ahead and it expects trading conditions to remain challenging.
The retail sector has issued a chorus of cautious outlook statements as consumer confidence remains at record lows in the face of rising food and fuel costs, stagnant wage growth and job insecurity.
At 08:29 GMT, M&S shares were up 2.4%, at 316 pence.
