High street giant warns of tougher times ahead
Oct 1 2009 By The Journal
HIGH street giant Marks & Spencer has warned of "tough going" in 2010, despite reporting its best trading performance for two years.
The retailer’s boss, Sir Stuart Rose, said the market had "bottomed out" as he unveiled a slower decline in sales but said he expects rising tax burdens and lengthening dole queues to put pressure on shoppers.
"I think what we have got is visibility and more confidence, but it is a fragile confidence," the executive chairman said.
His comments took the gloss off a smaller-than-expected 0.5% decline in like-for-like sales from M&S in the 13 weeks to September 26.
The retailer’s food sales halted eight quarters of decline as demand for premium goods were hit by last year’s food inflation and the tougher economic climate.
Like-for-like food sales were flat - although rival Waitrose boasted of a 4.1% rise in its food sales during the same period. M&S also held its market share in clothing, despite like-for-like merchandising sales falling 0.8%.
Sir Stuart said M&S would take on an extra 20,000 staff - more than last year - ahead of the Christmas season.
He was "quietly confident" over festive trading but refused to be drawn on predictions of a first return to like-for-like sales growth since 2007.
The chairman warned of "pressure on pockets" next year with the prospect of tax rises, rising unemployment and economic uncertainty.
"It is going to be tough going for the next 12 to 18 months. I don’t think it is going to be spend, spend, spend," he said.
Meanwhile pleas for the end of the temporary cut in VAT at the end of December to be extended for a week have also fallen on deaf ears so far at the Treasury, Sir Stuart said.
Despite lobbying from retailers such as M&S, Next and Sir Philip Green’s Arcadia, the VAT rise - coming halfway through the festive sales season - is set to add to the pressure at a critical time for the high street as a whole.
"All we are asking for is a week’s respite to get the sale out of the way," Sir Stuart added.
Richard Hunter, head of UK equities at stockbroker Hargreaves Lansdown said: "Profit margin remains under pressure and the company continues to rein in expectations ahead of what it expects to be a difficult 2010.
"In terms of the immediate outlook, M&S will now turn its focus to the important and impending Christmas season, where it will find obstacles in terms of competition and a potentially lethargic consumer."
