Few retail events have been anticipated with such baited breath as the revival of Marks & Spencer (MKS). It is not here yet but for the first time in years I really do believe that it could happen. Mind you, I read the figures for the first quarter to July 1 quite differently from other commentators, so I accept I could be wrong.
Total UK sales were actually up 2.6% compared with the same period last year. OK. It wasn’t anything like as good as that figure implies. For a start, the late Easter boosted sales by about 0.7%, but that still means there was some improvement.
I was intrigued to see headlines suggesting that clothing and home sales have risen. No, they were actually down yet again – alas, M&S is still nowhere near to sorting out its clothes racks – but they are not slipping anything like as badly as they have done for many, many quarters.
The most encouraging news this time, however, is that M&S is having to resort to fewer promotional sales in clothing. Full price sales were up about 7% and there was no clearance sale in the quarter. The summer sale has just started a week later than last year, with unsold stock for the season down significantly.
Food, in contrast, was depicted in the media as falling. Wrong again. Food sales were well ahead after looking vulnerable in the last update. I don’t take too much notice of a tiny slippage in like-for-like sales because it is the newly-opened Simply Food outlets that are doing the business.
Online sales are also growing strongly and the international arm has now closed 28 of the 53 stores regarded as surplus to requirements, which more than accounts for the underlying fall in overseas sales. It’s hard to know why the chain makes these ill-fated forays overseas from time to time. They always end in tears, so any retrenchment abroad is good news.
M&S shares fell 5% on the announcement, which seemed to me a bit harsh, coming as it did after they had already slipped from 395p at the end of May to below 340p. I can’t feel they are an irresistible bargain but any shareholders who have stuck with them this long should soldier on in hope. At least there is just a tiny glimmer of it.
And What of Other Retailers?
The improvement at Burberry (BRBY) was rather more clear-cut, with sales up 4% and, significantly, an improvement in Asia-Pacific, once the big growth region for the luxury fashion group but more recently a cause of worry.
The shares understandably jumped 3% on the better-than-expected figures and continued to rise the following day but I would caution against chasing them higher, although they are still below their peak six weeks back. It’s not so long ago that Burberry reported a 21% drop in full-year pre-tax profits. It remains vulnerable to belt-tightening here and abroad.
ASOS (ASC) reported sales up 32% in the four months to the end of June. While that was a slower rate of growth than seen in the previous six months, it is still a cracking pace. Retail margins have held up on the higher sales.
Particularly impressive is the 41% rise in EU sales despite the disastrous fire at its European distribution centre just after £6 million worth of clothing had been transferred to it. Despite that setback, ASOS says there has been a smooth transition to the hub.
The shares dropped 3% immediately after the announcement but had trimmed that back to less than 1% by the day’s close, still £15 down from the June 5 level of £64.30.
My main objection to ASOS is that financial statements are accompanied by a deafening silence on ever paying a dividend. For that reason I cannot recommend the shares as a genuine investment although they may be attractive for those who put capital gains first.
