Low Marks

The release covered the all-important Christmas trading period, a key focus for investors, and one which ended up being a contrasting affair for M&S.

On the one hand, the food division performed well with market-beating 17 per cent growth during Christmas week.

On the other hand, however, website disruptions that prevented customers clicking and collecting in-store, and also resulted in delivery delays, hit sales in the group’s general merchandise operation.

Other key numbers were mixed.

Despite the stellar Christmas week, food sales only increased 0.1 per cent on the previous year, on a like-for-like basis.

In general merchandise, sales were down 5.8 per cent, while the market expected a fall of only two per cent.

Share prices generally pay a penalty for a miss of such significance.

There was some good news, in the form of a lower rate of cost increases than thought; two per cent rather than 3.5 per cent.

With today’s depressed margins in retail, that sort of figure comes as a genuine comfort, provided it is not offset by failings elsewhere.

And what of the margin? The company guided us that its previous estimates still held, these being for increases of between 1.5 per cent and two per cent for general merchandise, and an altogether smaller jump for food.

Depending on how you slice and dice them, numbers can tell a multitude of stories, or cover a multitude of sins.

Due consideration must be given to a couple of extraordinary factors, specifically the website glitch and the unseasonably warm autumn weather which hampered sales of winter garments.

As an aside, we do hear the phrase unseasonal rather a lot these days and there does come a point where warm autumn weather becomes so frequent that it is really just seasonal.

But I’m no weatherman, and that’s by-the-by.

Over the long term, unless it is being systematically misled, the market is rarely wrong.

M&S shares have kept pace with their sector over the last year but lag badly over longer timeframes.

You could rightly read into this that the underperformance is not down to bad luck.

Womenswear, a key and highly competitive area, is one source of real frustration to the company.

They have invested in designers with the aim of improving the appeal of this offering but not much headway has actually been made, despite the company’s assurances they received positive feedback for the autumn/winter range.

It was the bad performance here that outweighed the welcome news on cost increases.

But the company has already reinvented one brand, showing itself to be capable of such a transition.

M&S has made great strides in food over the last few years, at least in terms of the customer experience and public perception if not financial performance.

Online is another area where M&S must step up to the plate.

The company has struggled to compete online against more established players like Next, as well as being undercut by budget stores such as Primark.

In the modern age, your online offering must be up to scratch in order to compete.

The board of directors is well aware of the demands of shoppers and investors alike.

The chances are that Marks and Spencer will get it right at some stage, but it looks like that time is some way away.

Nick Williams is an assistant director at Brewin Dolphin and offers advice on a wide range of financial services to private clients, trusts, charities and pension funds. Past performance is not an indication of future performance. The value of any investment and any income can fall and you may get back less than you invested. No investment is suitable for all people and should you have any doubts you should consult an authorised financial adviser. The information contained in this article has been taken from public sources and is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin Ltd. No director, representative or employee of Brewin Dolphin Ltd accepts liability for any direct or consequential loss arising from the use of this document or its contents.