LONDON (Alliance News) - British retailer Marks and Spencer Group PLC Thursday said group sales rose 1.9% in the last quarter of its financial year, as sales continue to be driven by its successful food business and improvements online, while general merchandise and clothing sales also picked up in the quarter.
The retailer said it remains cautious about the outlook, given the competitive and promotional pricing environment in the UK, despite some improvement in consumer confidence.
M&S said it now expects its gross margin in food for the full year to be up, but its general merchandise gross margin to be down, due to heavy discounting. It expects its UK gross margin to be down 20 basis points for the year.
M&S said the market current consensus for its full financial year is a pretax profit of between GBP615 million and GBP620 million.
For the 13 weeks to March 29, M&S said that total UK sales rose 1.5%, but declined by 0.2% on a like-for-like basis.
Its food business, which is the key growth driver for the group, saw sales growth of 2.5% in the quarter, with like-for-like sales up 0.1%.
Its general merchandise business, which includes its clothing and home range, saw sales growth of 0.2% during the period, although sales were still down 0.6% on a like-for-like basis.
"The fall in like-for-like general merchandise sales is because home was hit by the timing of Easter, and higher weighting to home in our online business," Chief Executive Marc Bolland told journalists in a conference call Thursday.
Within the general merchandise arm, clothing sales rose 1.3% in the quarter and increased 0.6% on a like-for-like basis.
The group trading statement for the fourth quarter highlights the same issues the retailer has been facing for many years: its food business is booming, but its general merchandise arm continues to struggle despite pumping money into high-profile clothing campaigns and revamping its womenswear collection.
Bolland said that general merchandise sales delivered another quarter of improvement, while clothing had its best quarter on a like-for like basis in three years, as womenswear showed signs of improvement and performed ahead of clothing.
"Clothing sales as better than expected, but it is a step-by-step approach," he said.
Internationally and online, the group delivered a good quarter, with sales in its online business M&S.com up 12.5%, and international sales up 4.7%.
During the quarter, the British retailer launched its long-awaited new website platform in February, a move it hopes will help turn around its ailing clothes and general merchandise business and catch it up with rivals who have been quicker at taking advantage of online sales.
M&S brought its e-commerce platform in-house back in November 2010, ending a seven year partnership with Amazon, which previously had run M&S's online platform.
"In May we will launch a new external marketing campaign to promote the site," the company said.
Internationally, M&S said its key markets delivered a strong performance in the quarter, with strong growth in India, its flagship stores in China and in the Gulf. It said it also saw a sales improvement in Greece, the Czech Republic and Poland.
Last week, M&S said that it is planning to open 250 new stores outside the UK over the next three years, as part of its global expansion plans.
It said that 60% of the new stores will be franchised, and that it will be entering new territories with existing partners. M&S said it expects the global expansion to increase revenues by 25% and profits by 40% over the next three years.
The retailer's future roll out plans include a franchise roll-out of fresh food in Europe, lingerie and beauty outlets, as well as expansion in China, India, the Middle East and Russia. It said that it is also looking to build on growth in China and India, with a local partner.
Marks and Spencer shares rose 2.0% in early trading Thursday at 465.30 pence per share.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Marks & Spencer (MKS)