Monday, 7 April 2014

Marks and Spencer Shares: Q4 2013 Trading Update

4Q13 sales on 10th April pre-market: DBe -0.2% UK LFL

No improvement in overall LFLs with a deceleration in Food offsetting a marginally better GM performance – the latter still losing market share despite higher-than-planned promotional activity. However, whilst 4Q represents the start of the 2nd season under new GM management & design leadership, most of Spring-Summer still lies ahead. Moving into 2014/15 we also expect opex growth to slow, supply chain benefits to build and M&S to benefit from better UK consumer demand and its new ecommerce platform.

Clothing share losses continuing…

Kantar data released this morning for the 12 weeks to 16th February shows M&S continuing to lose market share both overall (-37bps) and in the critical womenswear category (-67bps). Whilst this partially reflects weak performance already reported in Q3 we believe poor momentum has continued in a lackluster market. This comes in spite of ongoing discounting (e.g. 20% off vouchering) which management had hoped to reduce year-on-year. Hence we forecast Q4 GM LFL down -0.5% (was +1%) and FY GM gross margin down 50bps (versus guidance of down 30-50bps).

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