January 10, 2013 10:03 am

M&S shares fall after early sales release

Shares in Marks and Spencer tumbled nearly 5 per cent in early trading as investors digested Wednesday night’s rushed release of disappointing Christmas trading figures.

The trading figures were revealed in a hastily organised conference call after some details were leaked ahead of the planned Thursday morning release. Panmure Gordon analysts said the early release fuelled speculation of internal battles at the retailer.

Sales of general merchandise, including clothing, at the high street chain fell 3.8 per cent in the three months to the end of December from the same period last year, a worse than expected performance that adds to pressure on Marc Bolland, chief executive.

Food sales rose 0.3 per cent, also failing to meet market expectations.

M&S was one of the worst performers in a supermarket sector defined by discounting. But its margins held steady as it refused to join rivals in pre-Christmas markdowns, helping its bottom line escape a downgrade.

Analysts were generally downbeat on Thursday. Bethany Hocking at Investec warned that despite the margins being protected “there remains an awful lot to do to stop further profit deterioration”.

She wrote in a morning note: “M&S is becoming structurally less profitable. Food is growing whilst general merchandise is seeing significant sales declines. M&S must continue to grow general merchandise online if it is to stem ongoing market share losses – but this is also a less profitable channel.”

Analysts at N+1 predicted pressure on Mr Bolland would persist, given high levels of investment planned for the domestic business and little hope for a turnround in womenswear – one cause of the poor holiday trading – before the spring.

Shares in M&S fell 4.9 per cent, just an hour into London trading on Thursday morning to 353p. It has been a turbulent year for M&S shares, which were priced at about 380p in mid-March last year before falling more than 20 per cent over the spring and summer, and then rising again to almost £4 in mid-December.

The FTSE 100 rose slightly in Thursday morning trading.

Panmure Gordon said M&S stock looked attractive at current levels. “We argue that once there is better womenswear product, the sales, multi-channel or otherwise, will come. We thought that the spring/summer collection already looked a lot stronger than we have seen in the past few seasons, with trends such as monochrome strongly backed.”

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