January 9, 2013 / 8:47 PM / 5 years ago

UPDATE 1-Marks & Spencer's non-food sales fall in Christmas qtr

LONDON, Jan 9 (Reuters) - British retailer Marks & Spencer posted a bigger drop in non-food sales in its recently ended Christmas quarter than in the same period last year, only partially offset by higher food sales.

The 128-year-old group, Britain’s biggest clothing retailer, which also sells homewares and upmarket food, said on Wednesday like-for-like sales at UK stores open for more than a year fell 1.8 percent in the 13 weeks to Dec. 29, M&S’s fiscal third quarter.

That compared with a flat performance in the second quarter.

“Our general merchandise performance is not yet satisfactory, but we are confident that the steps being taken by the new management team will address this,” Chief Executive Mark Bolland said in a statement.

Many retailers are finding the going tough as consumers, whose spending generates about two thirds of Britain’s gross domestic product, fret over job security and a squeeze on incomes. With the retail market showing minimal growth, retailers are battling to steal market share.

An industry survey on Tuesday said underlying British retail sales rose just 0.3 percent year-on-year in December. That is well below the rate of inflation, suggesting stores sold less in real terms, and increases the chances that the economy contracted in the last three months of 2012.

M&S reported like-for-like sales of general merchandise, comprising clothing, footwear and homewares, fell 3.8 percent, versus analysts’ forecasts in a range of up 0.5 percent to down 3.5 percent and a second-quarter decline of 1.8 percent.

Food sales on the same basis rose 0.3 percent, compared with analysts’ forecasts of down 0.8 percent to up 1.5 percent and an increase of 1.6 percent in the previous quarter. The company said it had record sales of nearly 330 million pounds ($528 million) over the two key Christmas trading weeks.

The company said international sales rose 4.1 percent, bolstered by good demand in India and China, while sales through the Internet rose 10.8 percent over the same period.

“Our plan is to transform Marks & Spencer from a traditional UK retailer to an international multi-channel retailer. We are making good progress against this plan,” Bolland said.

Bolland is in the third year of a three-year plan to make M&S an international, multi-channel retailer - connecting with customers through stores, the Internet, tablets and mobile phones.

The group, a mainstay of many British town centres and best known for reasonably priced but high-quality staples such as socks and underwear, is spending 2.4 billion pounds ($3.8 billion) over three years on store revamps, logistics, IT and systems, along with selective investment overseas.

In May Bolland slashed the company’s three-year sales growth target, blaming the recession, and in July he shook up his general merchandise management team after the group reported its biggest quarterly sales drop for 3-1/2 years.

He has cautioned that the new team’s impact will not start to come through until the firm launches autumn/winter collections in July.

Shares in M&S, up 20 percent over the last year, partly reflecting takeover speculation, closed on Wednesday at 366 pence, valuing the business at 6 billion pounds.

M&S, which attracts 21 million Britons a week to its over UK stores, has nearly 400 stores in 44 countries overseas,

M&S had been due to update the market on Thursday, but issued its results late on Wednesday following a Sky News report.

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