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Jan 4, 2019
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M&S set to report bleak Christmas

By
Reuters API
Published
Jan 4, 2019

Britain's Marks & Spencer is expected to report another fall in underlying sales in both clothing and food in its Christmas quarter, while the major grocers are forecast to show a slowdown in growth as the discounters march on.




Expectations for the UK retail sector going into Christmas were low after industry data showed the largest November drop in shopper numbers for a decade and Sports Direct and Primark issued downbeat comments about trading.

A huge profit warning from online fashion group ASOS on Dec. 17 then routed share prices.

Clothing chain Next is the only major listed retailer to have reported on Christmas trading so far. It sprang a positive surprise with a late surge in online demand offsetting steep falls in sales in stores.

Analysts reckon Next is likely to prove the exception among non-food retailers as the sector battles a perfect storm of rising costs, uncertainty in the economy around Brexit and the structural shift online. Unlike its rivals, Next has a longstanding policy of not discounting before Boxing Day.

Analysts have highlighted a disconnect between supportive economic factors - with consumers' real earnings growing and employment levels high - and an apparent reluctance to spend, partly due to uncertainty over Britain's departure from the European Union at the end of March.

Britain's economic growth slowed to a crawl at the end of last year and the housing market is stalling, according to data published on Friday, less than three months before Brexit day.For M&S', Britain's most famous stores group, analysts are on average forecasting a fall of 1.6 percent in like-for-like clothing and homeware sales for its third quarter to Dec. 28, mirroring the previous quarter's decline.

Analysts are also forecasting a 2.5 percent drop in like-for-like food sales, partly reflecting management's moves to make the business more competitive by cutting prices. M&S will update on Thursday.

After over a decade of failed turnaround programmes, the 135-year-old retailer is now targeting sustainable, profitable growth in three to five years by shutting 100 stores by 2022 as it strives to make at least a third of clothing and home sales online. In November it warned that sales were unlikely to improve any time soon.

 

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