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02/10/2008
Sales Slump At M&S
Profits at the up-market national retailer, Marks & Spencer have slumped.
The company's 'bottom line' fell by around 6.1% in the three months up to September.
The retailer's results have shown, for the first time, how the current squeeze on consumer spending-power is adversely affecting certain sectors of the high street.
The trade update also represents a fall in like-for-like sales in 2007.
City analysts suggested M&S had suffered from a falling share in the clothing market, as well as price hikes in food costs.
"M&S remains a top-up and treat shop for food and is thus an entirely discretionary visit," Investec Securities said.
The business's clothing range has struggled to compete with cost-price retailers - such as Primark - while loosing food shoppers to low-cost supermarkets, the broker suggested.
The chain already sustained its worst quarter in three years during the 13 weeks leading to 28 June, with a 5.3% fall in UK sales reported in July.
This caught many city traders off-guard – with equally poor profits not recorded since April to June 2005.
However, the latest figures have pointed to a new and more gloomy 'dip' in trading conditions for the supermarket.
And according to Pali International analyst Nick Bubb "more downgrades" are expected.
Earlier this year M&S boasted £1b profit for the first time in 10 years.
Mr Bubb suggested this margin could fall as low as £670m this year, and reduce further to £550m in 2009, as the so-called 'credit crunch' continued to bite.
M&S boss Sir Stuart Rose said consumer confidence remained fragile and the retail environment was unpredictable.
"Consumers are increasingly cautious about their budgets," he explained.
Cost cuts have been predicted for the retailer.
"Capital expenditure this year is now expected to be around £700m, compared to our previous guidance of £800m-£900m," added Sir Stuart.
Earlier this week low-cost supermarket giant Tesco reported a 10% increase in half-year profits, amid the growing financial crisis – proving consumer spending has become increasing economical.
(PR)
The company's 'bottom line' fell by around 6.1% in the three months up to September.
The retailer's results have shown, for the first time, how the current squeeze on consumer spending-power is adversely affecting certain sectors of the high street.
The trade update also represents a fall in like-for-like sales in 2007.
City analysts suggested M&S had suffered from a falling share in the clothing market, as well as price hikes in food costs.
"M&S remains a top-up and treat shop for food and is thus an entirely discretionary visit," Investec Securities said.
The business's clothing range has struggled to compete with cost-price retailers - such as Primark - while loosing food shoppers to low-cost supermarkets, the broker suggested.
The chain already sustained its worst quarter in three years during the 13 weeks leading to 28 June, with a 5.3% fall in UK sales reported in July.
This caught many city traders off-guard – with equally poor profits not recorded since April to June 2005.
However, the latest figures have pointed to a new and more gloomy 'dip' in trading conditions for the supermarket.
And according to Pali International analyst Nick Bubb "more downgrades" are expected.
Earlier this year M&S boasted £1b profit for the first time in 10 years.
Mr Bubb suggested this margin could fall as low as £670m this year, and reduce further to £550m in 2009, as the so-called 'credit crunch' continued to bite.
M&S boss Sir Stuart Rose said consumer confidence remained fragile and the retail environment was unpredictable.
"Consumers are increasingly cautious about their budgets," he explained.
Cost cuts have been predicted for the retailer.
"Capital expenditure this year is now expected to be around £700m, compared to our previous guidance of £800m-£900m," added Sir Stuart.
Earlier this week low-cost supermarket giant Tesco reported a 10% increase in half-year profits, amid the growing financial crisis – proving consumer spending has become increasing economical.
(PR)
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