LONDON, Jan 9 (Reuters) - Marks & Spencer's muchvaunted new ranges failed to prevent the British retailer'sclothing sales falling for a tenth consecutive quarter, withheavy discounting in the key Christmas period forcing it to cutits margin guidance.
The firm said on Thursday all its other guidance wasunchanged and it avoided a formal profit warning thanks to asolid performance from its food division.
"Given continued pressure on disposable incomes, we remaincautious about the outlook," it said.
M&S's poor clothing performance will pile more pressure onChief Executive Marc Bolland, whose recovery plan is focused onhigher quality and more stylish fashions.
The firm cut its UK gross margin guidance for the full2013-14 year to level from previous guidance of a rise of 30 to50 basis points, reflecting pre-Christmas discounting.
Prior to the update analysts were an average forecasting a2013-14 pretax profit of 645 million pounds ($1.06 billion).
Despite signs of an improving economy there remains a lackof growth in household incomes and Christmas has so far beenmixed for British retailers.
M&S, Britain's biggest clothing retailer, which also sellshomewares and food, said sales of non-food products, spanningclothing, footwear and homewares, at stores open over a yearfell 2.1 percent in the three months to Dec. 28, its fiscalthird quarter.
That compared with forecasts in a range of flat to down 1.5percent, according to analysts who published estimates after M&Sstepped-up promotional activity in December, and a secondquarter decline of 1.3 percent.
Chief Executive Bolland blamed the below expectationsperformance on an exceptionally unseasonal October that sawgeneral merchandise sales "down strongly".
He said the UK clothing market saw "higher than ever" levelsof discounting in the quarter.
"Against this backdrop, we held our full price tradingstance for much of the quarter, but as the level of promotionalactivity in the marketplace intensified in the run up toChristmas, we responded with a number of promotions," he said.
He highlighted "early signs of improvement" in thewomenswear business, with small market share growth in this areafor the first time in three years.
Bolland, who joined as CEO in 2010 with a package worth upto 15 million pounds, has denied that the reception of M&S'sautumn/winter ranges will make or break his stewardship of thecompany, stressing recovery will be "step by step".
M&S's food business, which contributes over half of groupsales, is performing better. Its sales on the same basis rose1.6 percent versus analysts' forecasts of a rise of 1.1-2.5percent. However, the outcome did represent a slowdown fromgrowth of 3.2 percent in the previous quarter.
Marks & Spencer (MKS)