Marks and Spencer clothing sales not as bad as feared, food also strong

Womenswear sales were hit by bad weather in the first quarter at Marks and Spencer but were better than City analysts had feared, contributing alongside a solid performance from food and a return to international growth to produce 1.8% total growth in the period.Clothing sales rose 0.2% in the 13 weeks to 27 June, but fell 0.4% on a like-for-like (LFL) basis, though some analysts had pencilled in a 1% decline.The FTSE 100 company said that, in what had proved a "challenging and promotional quarter", management had continued to focus on improving the quality and style of the womenswear range."Sales were broadly level on last year and we are on track to deliver the planned increase in gross margin," reassured chief executive Marc Bolland.The performance from the food business was stronger, though not as impressive as analysts had hoped, with sales up 3.2%, or up 0.3% LFL, as the "specialist" strategy, in which 700 new product line were launched in the period, continues to deliver results.The programme to open 150 new Simply Food stores over the next three years was said to be "on track" with around 90 openings slated for the current year and with new stores said to be performing well.Analysts noted that the increased business flexibility from recent IT investment enabled M&S to manage its gross margin and reassure that remained on track for full year guidance. M&S.com, which returned to growth in the preceding quarter, maintained progress with 38.7% growth in sales, though this was against weak comparatives.From a geographic perspective, total UK sales rose 1.9%, flat on a LFL basis, while international sales were up 0.7%, having fallen in the preceding quarter and the last year as a whole.Darren Shirley at Shore Capital said that, overall, the statement was "broadly in line with relatively subdued expectations", with clothing, or General Merchandise, LFL a little better than expected but food a little softer.The main point for Shirley was that M&S was not able to sustain the positive LFL momentum in GM into the new financial year."Such a lack of see-through is a modest disappointment to us, not least because we have been more positive on the stock since its FY2015 preliminary results on 20 May 2015. That said, with GM trading not as bad as feared across the market and noting the stock sits circa 10% below its recent (27 May 2015) highs, we remain positive and expect a robust performance today."With no changes to consensus expectations expected, Investec's Kate Calvert agreed that the shares' valuation - with a 2016 forecast p/e ratio at 14.4 times versus the sector average of 15.5 times - "does not reflect business model shift to cash generation and a material general merchandise gross margin opportunity, in our view, with upside risk to forecasts".