Foods-to-fashion retail giant Marks & Spencer (MKS) has fallen 2% to 451.6p as investors bemoaned another fall in clothing sales. Coinciding with positive weather-driven sales data from the broader UK fashion sector, another uninspiring quarterly performance in clothing piles further pressure on M&S chief executive Marc Bolland.


Over the first quarter to 29 June, the £7.4 billion cap's UK general merchandise sales (including clothing, footwear and homewares) waned by 1.6% on a like-for-like basis. Worse than consensus estimates of a 1.5% decline, this downbeat performance represents an eighth consecutive quarter of falling sales and suggests M&S continues to lose share in the ultra-competitive, highly-promotional fashion market, where its ladieswear ranges have long underwhelmed.


Although the General Merchandise result did represent some improvement following a revamp of the clothing division to arrest flagging sales, much now hinges on the new Autumn/Winter collection. This has received good reviews from the fashion press and will start to arrive in stores and online from the end of this month ahead of a full launch in September.


An uninspiring clothing turn comes at a bad time for Bolland, accompanying encouraging data for the rag trade out today from the British Retail Consortium (BRC). The BRC-KPMG Retail Sales Monitor (RSM) for June confirms a year-to-date pick-up in business for the nation's shopkeepers, with like-for-like retail sales up 1.4% year-on-year and total sales up 2.9% against a 3.5% increase in June 2012.


Significantly, clothing and footwear were the best-performing categories, benefiting from a warmer June than last year, while online sales were up 14.1%, ahead of the 12.1% growth seen in the same month a year ago. According to BRC Director General Helen Dickinson, 'at this halfway point in the year we are able to see that sales are well ahead of the previous six month period, confirming that the retail recovery is continuing.'


Fine weather since the start of July should be helping a raft of apparel and footwear retailers, among them online fashion phenomenon ASOS (ASC:AIM), running Play of the Week N Brown (BWNG), department store operator Debenhams (DEB) and Superdry-brand owner SuperGroup (SGP), to shift their spring and summer ranges.


General merchandise gloom aside, M&S did grow overall UK like-for-like sales 0.3% with strong food sales growth of 1.8% offsetting the decline in clothing. Bolland was also able to point to group sales up 3.3% in the first 13 weeks, boosted by 8.7% growth in International sales with a helping hand from M&S' key markets of India, China and the Middle East. A further bright spot was online, with M& delivering near-30% growth as customers warmed to free next day deliveries to its stores.


Clive Black, retail sage over at Shore Capital, is keeping the faith following today's rather mixed update, sticking with his 'buy' rating on the retail bellwether. He writes: 'The Q1 update still raises the need for a further improvement still in core trade in the UK, and we note the gross margin trembles from Q1; that said we see some grounds for a little more optimism at this juncture. Despite a reasonably encouraging share price performance this year to date, reflecting an amalgam of encouraging investor engagement, potentially improving prospects and bid speculation, we remain positive on the stock as we believe the prize from delivery of the present strategy could still be worthwhile.'


Broker N+1 Singer, with a 'hold' rating and 445p price target, notes that 'whilst this update contains the benefits of certain changes in the business, it's the new A/W (Autumn/Winter) ranges (Q2) that will determine the next share price move. There is a precedent for fashionability or range driving a turnaround in the M&S share price performance, namely Autumn 2005 when the stock rallied over 40% in six months after a step change in the offer.'

Issue Date: 09 Jul 2013