Retail behemoth Marks & Spencer (MKS) is back in fashion after delivering its strongest quarterly sales growth for two years. The shares jumped 3.7% to 397.8p as the £6.2 billion cap reflected a better-than-feared fourth quarter performance in its struggling General Merchandise business, implying a clothing turnaround is at last in place.
Total UK sales in the first three months of 2013 grew 2.6% with like-for-like sales up by 0.6%. Within that mix, like-for-like food sales skipped 4% higher, well ahead of the market. Hotly-anticipated, M&S reported a poor but less-severe-than predicted 3.8% fall in its core General Merchandise business, which includes clothing, against a 4.5% consensus decline.
Given the cold weather which saw shoppers hold back from buying summer clothes, and the need to invest in price promotions, today's update comes as a relief to supporters of M&S. The retail titan is seeking to reinvigorate clothing sales and particularly its womenswear ranges under a new high-profile general merchandise team that includes long-serving M&S operator John Dixon as 'Executive Director General Merchandise' and former Debenhams (DEB) boss Belinda Earl as 'Style Director'.
Unsurprisingly, chief executive officer Marc Bolland was especially enthusiastic about M&S' 'excellent result in Food, with performance well ahead of the market, as customers continued to trust us for provenance and quality.' M&S, which enjoyed its biggest ever Easter week, has now served up more than three years of consistent positive like-for-like food sales growth. This morning's figures suggest the company has benefited from the meat contamination scandal that has befallen High Street rivals, while the recent cold snap has fostered consumer appetites for hearty meals.
Overall, M&S reported 3.1% growth in group sales boosted by a 7% advance in revenues from overseas. Within 'International' both China and India traded strongly, M&S' franchise business in the Middle East did well and M&S enjoyed an improved performance in sovereign-debt stricken Europe too. Total sales were up 2.6% here in the UK and analysts were also impressed by acceleration in multi-channel sales growth, as M&S witnessed improved web site traffic and more customers used its 'Shop Your Way' click and collect service.
One broker upbeat on the story is Panmure Gordon, which upgraded its recommendation to 'buy' in March on M&S – whose shares surged on vague takeover talk involving the Qatar Investment Authority and private equity earlier this year. The broker says: 'We are Buyers of M&S because we believe that in under six months M&S will be displaying a much stronger womenswear range and in under twelve months the website will migrate to a new, proprietary platform away from the current host, (competitor) Amazon.' M&S will report full-year results on 21 May.