Marks and Spencer sales not as bad as expected as online keeps improving

Marks and Spencer Group PLC (LON:MKS) has reported a better than expected fall in sales in both food and general merchandise over the pre-Christmas quarter.

With a high proportion of stores in the sort of city centre locations that have been hit hardest by the effect of the coronavirus pandemic, sales of £2.8bn were generated for the 13 weeks to December 26, 2020, down 8.4% compared to the same period last year.

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Boosted by a strong performance from the Ocado Retail joint venture, sales in the Food arm were up 2.6% on a like-for-like (LFL) basis to £1.7bn, with 5% and 4.4% growth either side of England’s national lockdown in November but down 4.5% amid those restrictions.

With a sales mix heavily biased to pandemic trends such as sleepwear and leisurewear, the Clothing & Home department recorded revenues of £787mln, down 24.1% compared to last year on an LFL basis, with a 40.5% decline during November’s restrictions, but not losing as much ground in the periods either side.

While in-store Clothing & Home sales declined 46.5%, online sales jumped 48% to £353mln.

“Given the on-off restrictions and distortions in demand patterns our trading was robust over the Christmas period,” said M&S chief executive Steve Rowe in the trading update.

“More importantly beneath the Covid clouds we saw a very strong performance from the Food business including Ocado Retail and a further acceleration of Clothing & Home online.”

House broker Shore Capital said sales in both departments were “better than we and consensus anticipated”.

“Lockdown 3.0 will negatively impact Q4 FY02021 trading (c£25m per month), but the group is progressing at pace, we note a clean stock position and the successful £300m bond issue; year-end net debt should be down,” its analysts added.