In its third-quarter sales update for 13 weeks to 30 December 2023, Marks & Spencer (M&S) delivered a "strong" trading performance with group sales up 7.2% to £3.86bn (US$4.92bn).
Total UK sales were up 8.5% to £3.57bn for the period, however total international sales saw a decline of 6.4% to £288m. This is said to have been largely driven by the planned timing of franchise shipments in the Middle East and Asia and more challenging market conditions in India. The retailer explained it is reviewing its priorities and working with its franchise partners, to improve performance.
Total sales for clothing & home in the third quarter were up 4.8% to £1.24bn with the retailer stating it had growth in average selling price, which was partly a result of reduced promotions year-on-year.
M&S chief executive Stuart Machin said: "In Clothing & Home, we delivered a good performance with sales growing ahead of the market and less stock going into sale. Womenswear has been the standout, growing volume and value significantly ahead of the market."
He also pointed out it was the highest full-price market share for over a decade for clothing and home, which was led by the strong performance of womenswear, and supported by improved customer perceptions of style, quality and value.
Clothing and home store sales increased 2.0%, with new full-line stores performing ahead of plan. Online sales grew 10.9%, with improved carrier service levels and strong demand for click-and-collect compared to last year. Knitwear, denim, and top-of-range Autograph lines performed well. The price sales mix improved and stock into sale was reduced 6% year-on-year. With a deeper initial cut in line with M&S's objective of a shorter clearance sale, the retailer said sell-through rates have been encouraging.
GlobalData senior apparel analyst Pippa Stephens noted M&S’ UK clothing & home division's 4.8% increase was slightly stronger than its Q2 growth of 4.1%, with a particularly good performance seen within womenswear.
She said this uplift was bolstered by higher average selling prices as M&S cut back on promotions, with its improved fashion credentials and quality aiding desirability and enabling consumers to justify paying full price for its products.
However, she also pointed out: "Despite ongoing investment in new locations and refurbishments, with November being its biggest ever month of store openings, M&S’ physical UK locations underperformed, growing by just 2.0%, compared to 10.9% growth for online. Though the outperformance of online will be partly due to Royal Mail strikes in the comparative period, it is also a testament to the enhancements M&S has made to its digital proposition. However, it must also focus on strengthening store sales through the revitalisation of its older full line locations, with many of these lacking inspiration and modernity.”
Overall, Retail Economics CEO Richard Lim believes M&S' results were “fantastic" given they were delivered in a challenging market.
He asserted shoppers have fallen back in love with M&S, buying into the re-energised proposition that's centred around a leading omnichannel service, and added: "It's been a mightily impressive turnaround and there's lots of momentum in the business heading into 2024."
Machin highlighted the retailer enters 2024 with a spring in its step, but clear-eyed on the near-term challenges.
He stated: "We are determined to deliver our objective of driving 1% growth in market share in both businesses and to up the pace of our transformation: keeping a relentless focus on trusted value; accelerating our store rotation and renewal plans; doubling down on our supply chain programmes to improve availability and lower costs; and resetting our data, digital and technology strategy to unlock benefits in future years.
"Our vision is to be the most trusted retailer, doing the right thing for our customers, with quality products at the heart of everything we do, and we are just at the beginning of what we can achieve. Lots done, lots to do, lots of opportunity ahead."
The retailer said its FY25 expectations for economic growth remain uncertain, with consumer and geopolitical risks. It pointed to the additional cost increases from higher than anticipated wage and business rates related cost inflation.
Nevertheless, it believes the strong Christmas trading performance provides confidence that the results for the year will be consistent with market expectations.
Stephens added: "Though it is aware of the obstacles ahead, as consumer spending remains squeezed, M&S is still positive about its outlook for 2024, and is hoping that focusing on value for money, store upgrades, supply chain improvements and digital strategy will allow it to maintain its upward trajectory."
Machin agrees and concludes: "While the outlook remains challenging, it is well-positioned to navigate through these choppy waters."
