Interactive Investor

M&S up after better-than-expected figures

10th April 2014 09:15

Ceri Jones from interactive investor

Marks and Spencer announced better sales figures than expected on Thursday. Food sales rose just 0.1% in the thirteen weeks to 29 March, its 18th consecutive quarter of growth.

Marc Bolland, chief executive, said it "continued to outperform the market with record sales around key events including Valentine's Day and Mother's Day". The company was well set for Easter season, he said, and a third of the range is new this year giving customers more choice than before.

The result for food was a pleasant surprise after last week's Goldman Sachs 'sell' recommendation based on increasing competition in the UK grocery market. Goldman put the stock to its "conviction sell list" and slashed its target for the shares from 420p to 340p.

Sales in its non-food division have fallen for the 11th quarter in succession, but the like-for-like fall was 0.6% in the three months to the end of March, which was less than expected. This is a result of the makeover by Belinda Earl, former CEO of Debenhams and Jaeger, who joined in April 2013 and launched a new women's fashion range based on a refocus on "quality and style".

Bolland said "sales of M&S Collection in Womenswear, which was re-launched last Autumn, were notably up on last year. Our new Spring/Summer collection has been well received, with customers noticing the improving style credentials."

The real encouragement however came from online sales which climbed a massive 12.5%, despite the disruption of the migration of its website from Amazon to its new platform, which meant it reduced its usual level of marketing activity during the switch. A new marketing campaign to promote the site is planned for May.

International sales also rose 4.7%, delivering a strong performance in India, China and in the Gulf, and a good improvement in Greece and Czech.

The company issued guidance that UK gross margin for the full year will be down round 20 basis points, and it remains cautious.

Investors welcomed the news and the shares rose 2.2% in the first hour of trading to 465.85. The store will report its full-year results on 20 May.