Marks & Spencer Third Quarter Results: What The Analysts Said

By Steve Wynne-Jones
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Marks & Spencer Third Quarter Results: What The Analysts Said

Marks & Spencer has posted a 3.9% decrease in group sales in the third quarter of its financial year, with Food (-1.2%) and Clothing & Home (-4.8%) also seeing declines.

Chief executive Steve Rowe has commented that the business' transformation programme remains "on track", saying, “Against the backdrop of well publicised difficult market conditions our performance remained steady across the period."

Here's how leading retail analysts viewed its performance:

Kate Ormond, GlobalData

‘‘Given the significant transformation programme underway there is little shock value in a poor set of M&S Q3 results, with UK sales falling 2.7% to £2,782m; indeed the real headline is the fact that full year profit guidance remains unchanged. However, despite mentions of a ‘steady performance’, ‘early encouraging signs’ and ‘progress’, slow and steady will not win the retail race and M&S needs to show real evidence of change in ranges and in results, as the pressure to deliver continues to mount.

"The food division’s performance, with lfls down 2.1%, has been hit by its investment in price, focusing on offering shoppers better value – needed in a market where price is everything and the discounters continue to thrive."


Fiona Cincotta,

"Management has described this sales result as steady, but about the only thing steady about it is the continued blood-letting. Clothing sales have fallen by more than expected in what was admittedly an especially tough Christmas for high street retailers. Even so, it would be nice to see some scintilla of evidence that M&S's clothing style, range and price overhaul is enticing customers. So far we've seen zip.

"The fall in food sales, while not as terrible as some were fearing, is still a deep one. Certainly deep enough to sustain doubts about the potency of M&S's lower-price strategy. On the basis of this update, more food store closures can't be ruled out."

Eleonora Dani, Stifel

"General merchandise LfL of -2.4% is slightly weaker than consensus, but perhaps not particularly surprisingly in the light of other sector news flow. However, we expect little or no change to consensus profit expectations, given that full year guidance remained unchanged. We continue to see M&S's shares trading in line with the UK retail environment and consumer confidence, both not particularly strong ahead of March 29.

"Food LfL -2.1% vs consensus -2.5%; analysts expected less benefit from Christmas as, despite M&S lowered prices, premium food competition increased. Judging from the recent set of trade updates, we think other players were indeed more competitive: Morrisons (nine weeks to 6 Jan), retail LfL +0.6%, and Sainsbury's (15 weeks to 5 Jan), grocery +0.4%."


Richard Lim, Retail Economics

"These results are worse than expected. It's increasingly evident that Christmas is becoming an online event and these figures reaffirm the polarisation of shopping habits with online propping up the poor performance of their store sales. This accelerating trend has benefitted the retailers that have the scale, capacity and seamless online operations to cope with the peak in demand over Christmas and M&S is struggling to keep up.

"Put simply, the retailer is burdened with too many stores, unsuitable space and the spiralling operating costs associated with this outdated business model. As a higher proportion of sales move online, the cost of fulfilling these orders are rising too. Set against the backdrop of fragile consumer confidence, it's a difficult place to be."

Clive Black, Shore Capital

"M&S has delivered a FY2019 Q3 update that records continued negative LFL sales, delivered in a quite distinctive and notably challenging UK market. We shall come to the detail of the performance shortly but following management’s interim results presentation in November, the key point we wish to convey is that the Group’s medium-to-long-term transformation programme, which now has most of the main management characters in place, is on-track. That said there is a whole lot more to do.

"Beyond the relatively narrow terms of Q3-4 FY2019 we believe that M&S has a good Chair, CEO and CFO and a transformed senior management team that is now actually changing the Group's culture, necessarily, for the better. More to the point, the change programme is now well into 'doing' mode with notable progress in Q3 online, in head office, human capital development and the food proposition."


Catherine Shuttleworth, Savvy

"Marks and Spencer however hasn’t fared well - with both foods and clothing seeing sales falling. This is not good news for the stalwart of the high street which appears to be out of step with what the UK consumer wants. Despite huge investment in advertising spend, it turns out we just aren’t feeling the love for M&S at the moment."

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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