There was huge excitement last week after that icon of the British high street, Marks & Spencer (MKS), reported the first positive like-for-like sales growth in the general merchandise (GM) division for 15 quarters. Underlying sales ticked up 0.7 per cent in the fourth quarter, against expectations for a 1.1 per cent fall, thanks in part to what the company identified as a "focus on quality and styling".
But the biggest driver behind the result was a return to sales growth in the online business, which was up 14 per cent in the period, following a year blighted by warehousing and distribution issues. Guidance for a 150-200 basis point improvement in the GM gross margin will also be welcomed as a sign that management's focus on improving full-price sales is bearing fruit. What's more, operating costs across the group will be lower than first thought.
M&S Food served up a respectable performance, too, particularly in light of the wider problems plaguing the food retail sector and rival Waitrose's recent, less-than-plump, trading figures. Overall, sales grew 4 per cent, while like-for-like sales rose 0.7 per cent.
But before investors get too excited, there are reasons to remain cautious. Much of the improved performance in the UK will be offset by Marks & Spencer's international division. Macroeconomic issues in Russia, Ukraine and Turkey and a weakening euro left overseas sales down 4 per cent in the final quarter. Worse still, these headwinds are expected to "have significantly impacted international second-half profit." Moreover, one quarter of only just positive LFL sales growth isn't yet evidence of a wider trend.
