M&S gives the skinny on its jeans fiasco: Shares hit as clothes and mince pie sales fail to meet expectations
Shares in Marks & Spencer fell sharply after it admitted that it failed to sell as many mince pies and skinny jeans as expected over Christmas.
Sales in the 13 weeks to December 28 were 0.2 per cent higher than in the same period 12 months earlier – the first rise in quarterly takings in three years.
But a 1.7 per cent fall in clothing and home sales took the shine off a 1.4 per cent rise at the food arm.
Marks & Spencer warned that large amounts of food waste put a squeeze on margins, hitting its profits
M&S also warned that large amounts of food waste put a squeeze on margins, hitting its profits.
Shares fell 11.1 per cent, or 24.2p, to 194.4p in the latest disappointment for investors who saw M&S relegated from the FTSE 100 index for the first time last year.
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: ‘Competition in clothing and home is at fever pitch, and it’s a battle M&S isn’t winning.’
The company’s drive to entice a cooler, younger customer backfired in menswear, with its trendy skinny jeans left on the sale rail.
M&S has been trying to turn its fortunes around for a over a decade, and has seen its profits fall from over £1billion in 2008 to £523million last year.
In food it wants to compete for the big weekly shop and has introduced own-brand lines to appeal to families.
It took a £650million gamble on a food delivery partnership with Ocado, which will begin in the autumn.
Bosses yesterday summarised their performance as ‘good progress’ in a market that was ‘very subdued’.
There was ‘unprecedented discounting’ in the run-up to Christmas in the grocery market, chief executive Steve Rowe said, but customers were responding to M&S’s new focus on ‘value and relevance’.
But the good news was dented by food waste, a ‘one-off’ issue caused by the company trying to keep the shelves full over Christmas. This left M&S with unsold mince pies and other Christmas favourites.
In clothing, issues with supply persisted as stores stocked too many slim styles in a fashion shift that proved too abrupt for M&S customers, and they ended up being sold at knockdown prices.
‘Where we introduced contemporary skinny and slim, got balance slightly wrong,’ Rowe said.