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Investors “lose confidence” in M&S following food and drink decline

Published:  11 July, 2017

A disappointing drop in food and drink sales at Marks & Spencer has put a dampener on CEO Steven Rowe’s recovery plan for the retailer. 

The all important food sector took a tumble in Q1, M&S has reported, with like for like sales dropping by 0.1%, despite estimates that category was due to pick up by 0.6%.

This was on top of a continued downward slump for clothing, which declined by 1.2% - the category’s second consecutive quarter of decline.

Kathleen Brooks, research director at said the retailer has been a victim of “weak economic outlook” with rising inflation and weak wage growth eating into spending power.

Despite the like-for-like decline in both food and clothing, Rowe said that trading in the first quarter was in line with projections for the year, with “New Simply Food stores continu[ing] to perform ahead of our expectations”.

Year-on-year food sales and total UK sales for the year rose by 4.5% to £1,407.1m and 2.6% to £2,259.2m respectively.

But while it is true that the rate of decline has begun to slow under the new chief exec’s new leadership, disappointing like-for-like sales means the quarter this isn’t the boost to M&S’s fortunes that the executive team were hoping for.

“Unsurprisingly, the share price has dropped 3p at the UK open, as investors lose confidence in the outlook for the UK high street stalwart,” Brooks said.

“The future looks fairly bleak,” she added. “Barclaycard released data this morning showing a 2.5% drop in consumer spending last month, as higher prices meant that consumers concentrated on the essentials.

“Analysts are starting to question whether M&S is falling behind its peers, particularly in food and drink sales, which fell 0.1% on a like-for-like basis, below rivals such as Sainsbury and Tesco.”