Discount War Could Hurt M&S

LONDON -- Clothes-and-food retailer Marks & Spencer increased its profit guidance for the year on Wednesday, but industry watchers warned that a discount war on the British high street ahead of Christmas could hurt the firm's margins.Katherine Waynne, a retail expert at Investec Securities in London, said M&S was still under pressure and faced a "very competitive" environment ahead of Christmas. This was in spite of the company predicting that its annual gross margin would fall by only 50 to 100 points for 2009--better than the previously guided basis point fal of 125 to 175--and posting better-than-expected sales for the second quarter."M&S launched distressed pre-Christmas discounting last year following the collapse of Lehman Brothers and it is hoping not to do that this year," said Waynne. "Nobody wants to be drawn intro aggressive discounting at this point."Retail rival Debenhams launched its midseason sale on the same day of M&S' results, slightly earlier than other rivals. "Debenhams has gone out early, and this will put some pressure on competitors like M&S," Waynne added.Competition aside, M&S also has to fight against gloomy consumer sentiment. "Consumer confidence might be improving but M&S has seen shoppers trading down, especially in women's wear. We have at least seen this trend during the summer but it's too early to say whether it will continue," the analyst said.Shares of Marks & Spencer ( MAKSY - news - people ) fell 2%, to 367.50 ...
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Summer Of Love For M&S

LONDON -- Brits have not been the only ones benefiting from the U.K.'s unusually hot weather this summer. It also apparently helped British mid-market retailer Marks & Spencer get more goods off the shelves and post a smaller-than-expected drop in first-quarter underlying sales.And while its chief executive, Stuart Rose, said he was "cautious about the outlook for the remainder of this and next year," analysts said the positive momentum in the company's shares could last for the rest of the year. Shares of Marks & Spencer, which sells clothes, housewares and food at over 600 stores in Britain and about 285 internationally, jumped 4.6%, or 14.00 pence (23 cents), to 320.00 pence ($5.25) in morning trading in London. "Expect the stock to rise in the next three to six months," said Luca Solca, an analyst with Sanford C. Bernstein. "The trading update was good and same-store sales were ahead of expectations. If we don't have any major market pullbacks, M&S should benefit with easier comparisons and the likely upward revision."The retailer has said its priorities include an improvement in its food business, badly hit by cheaper options on the market, and an increase in its international operations. Analysts expect the Indian food retail sector, where M&S has a foothold, to grow by between 10% and 15% in the next two years.Marks & Spencer has partly benefited from an improvement in consumer confidence but also by keeping benchmark products at the same price as competitors to show shoppers they are paying a fair price, said Anne Critchlow, an analyst with Societe Generale in London. Solca said the 125-year-old company also benefited from better weather at Easter and by managing to lure shoppers through promotions.Though this was the company's seventh quarterly sales decline in a row, it represented the best perf...
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No Relief For Marks & Spencer

LONDON--Legendary clothes-and-food retailer Marks & Spencer is tied to the fate of the British economy, with domestic sales accounting for 90.0% of revenues. And with Britons trading down, cutting back and generally not frittering away their income so easily, Marks & Spencer conceded on Tuesday that its efforts to cut prices and invest in promotion had not been enough, and said it would cut its dividend by 33.1%.Shares of Marks & Spencer ( MAKSY - news - people ) tumbled 6.7%, to 316.50 pence ($4.90), after the announcement, which came alongside a set of broadly unsurprising but cautious 12-month results. The retailer said its profits fell to 506.8 million pounds ($784.7 million) over the year, from 821.0 million ($1.3 billion), a drop of 38.3%. Sales remained static over the year, but in the key British market--stripping out the effects of new store openings--sales actually fell 5.9%."We remain cautious about the outlook for the remainder of the year," said Stuart Rose, chairman of Marks & Spencer, who has had a tough time at the top over the past 12 months. He came under attack for his promotion to chairman from chief executive last year--a no-no according to corporate governance best practice--and risks angering small shareholders further with the dividend cut.This uncertain outlook may depress the stock further, after its rise of nearly 60.0% over the past six months. Citigroup analyst Richard Edwards said Marks & Spencer's guidance for the next 12 months had come in below his expectations, forecasting a 1.25-1.75 percentage-point drop in gross margin, whereas h...
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Euro Stocks Out Of The Gutter

European shares snapped back from a two-day losing streak on Tuesday as investors awaited U.S. data on home prices, manufacturing and consumer confidence, and President Barack Obama prepared to leave the United States for a whirlwind tour of Europe ahead of the G-20 summit in London. The Dow Jones EuroStoxx index of 50 leading shares rose 1.9%, to 2,049.16 points in afternoon trading, with banks and health care stocks the strongest gainers. Britain’s FTSE 100 jumped 3.3%, while France's Cac-40 was up 2.1% and Germany's DAX rose 1.9%. Russia's RTS index rose 2.1%, to 696.92 points in Moscow.“The macro landscape has been stabilizing, which has helped equities bounce back from historical lows. But to really improve market sentiment, we need to see the data improving and not just stabilizing," said Jacques Henry, analyst at Louis Capital Markets. Ahead of the Group of 20 meeting this Thursday in London, inflation for the euro zone fell from 1.2% in February to 0.6%, a record low. The prospects of deflation could become a talking point at the summit.Shares of (other-otc: SHPGY - news - people ) jumped 6.8%, or 54.00 pence (77 cents), to 849.50 pence ($12.15) after the Basingstoke, England-based drugmaker said it would start promoting Vyvanse, which targets attention deficit hyperactivity disorder, or ADHD, together with (nyse: GSK - news - ...
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March Surge For Global Shares

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M&S Adapts To Tough Times

British mid-market retailer Marks & Spencer is known for putting quality over cost cutting, but the company's offerings of cheaper food and sales outside the United Kingdom helped it post better-than-expected fourth-quarter sales on Tuesday. Shares of (other-otc: MAKSY - news - people ), which has been hit hard by the economic slump as shoppers give up pricey products, jumped 8.9%, or 23.50 pence (34 cents), to 288.00 pence ($4.11) in morning trading in London.The company, which will publish its annual results on May 19, said fourth-quarter sales rose 1.9%, despite a fall of 4.2% in the U.K., boosted by a 23.0% growth outside Britain. Marks & Spencer’s chief executive, Stuart Rose, said the company had managed costs and cash flow “tightly” and said a better range of cheaper products helped improve food sales during the quarter. “While the outlook remains uncertain, we are confident that we are doing the right things for our customers and for our business,” said Rose. In November, Marks & Spencer posted a 43.0% fall in net profit to 223 million pounds ($319 million) for the first half of the year. In January, the iconic retailer said it would close 27 stores in its cost-cutting efforts. (See “Marks & Spencer Reaps Dividends.”) The retailer has said its priorities include an improvement in its food business, badly hit by cheaper options on the market, and an increase in its international operations, expected to grow by between 10.0% and 15.0% in India i...
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M&S Wins Cookie Battle

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