LONDON (Reuters) - British retailer Marks & Spencer (MKS.L) posted its best quarterly non-food sales performance in four years, putting behind it the online distribution problems that ruined its Christmas and buying its chief executive more time to secure a recovery.
Shares in Britain’s biggest clothing retailer rose as much as 6.3 percent to a seven-year high after it said sales of general merchandise, spanning clothing, footwear and homewares, rose 0.7 percent in the past quarter at stores open more than a year.
CEO Marc Bolland highlighted “high single-digit” like-for-like sales growth at both its relatively upmarket Autograph and Limited clothing brands, and noted positive press reviews of a 199 pounds suede skirt that will hit stores this month and is attracting high levels of pre-registration.
The outcome was the first time in 15 quarters M&S has not posted a fall in non-food like-for-like sales and was also better than analysts’ average forecast of down 1.2 percent.
It followed a third-quarter slump of 5.8 percent, reflecting unseasonal weather in October and November and disruption at its e-commerce distribution centre at Castle Donington in central England.
Bolland, CEO since 2010, has spent billions of pounds addressing decades of under-investment at M&S, overseeing a redesign of products, stores, logistics and its website.
But a new clothing team he set up in 2012 has so far failed to deliver a sustained increase in sales. When products have proven a hit, it has often struggled to replenish supplies fast enough before shopper interest subsided.
However, a food business outperforming the wider grocery market and improving profit margins both in non-food and food have kept investors onside, with M&S shares rising 44 percent over the last six months.
“It’s a step-by-step journey and we’re taking steps in the right direction,” Bolland told reporters. Asked how long he planned to stay as boss, he said: “I’m really enjoying the role and there’s more to do.”
M&S shares were up 30.5 pence at 560.5p by 0928 GMT.
“We continue to see a material gross margin opportunity in general merchandise, which we expect to drive forecast upgrades over the next few years,” said Investec analyst Kate Calvert.
Bolland’s strategy is to focus on margin. M&S maintained guidance for a rise in general merchandise gross margin in 2014-15 of between 150 and 200 basis points, having promoted less and focussed more on full-price sales.
M&S.com sales returned to growth in the quarter with sales up 13.8 percent, while Castle Donington was said to have performed well.
Like-for-like sales in M&S’s food business rose 0.7 percent in the 13 weeks to March 28, its fiscal fourth quarter, a 22nd straight quarterly rise. Full-year gross margin guidance for food was maintained at up 10 to 30 basis points.
However, M&S said macro-economic issues in Russia, Ukraine and Turkey, coupled with a weakening in the euro, had dented second-half profit in its international division, where fourth-quarter sales fell 3.8 percent.
M&S, expected to post a first profit rise in four years when it reports yearly results on May 20, said it still expected analysts’ consensus for 2014-15 profit to edge up from 641 million pounds prior to the update.
Editing by Paul Sandle and David Holmes