Marks & Spencer expected to show improving trend for non-food sales

Fri Mar 27, 2015 8:27am EDT
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By James Davey

LONDON (Reuters) - British retailer Marks & Spencer (MKS.L: Quote) is expected to report an improving trend for its non-food business as it starts to put its online distribution problems behind it, despite a drop in sales for the 15th quarter in a row.

Marc Bolland, CEO since 2010, has spent billions of pounds addressing decades of under-investment at M&S, overseeing the redesign of products, stores, logistics and its website. But a new clothing team he set up in 2012 has so far failed to deliver a sustained increase in sales.

However, a food business outperforming the wider grocery market and improving profit margins both in non-food and food have kept investors onside, with the group's share price rising by 27 percent over the last six months and 16 percent in the last year.

The shares were trading around 535.50 pence on Friday, putting the stock on a forward price-earnings ratio of 16.4, in line with that of its nearest rival, Next (NXT.L: Quote), according to Thomson Reuters data.

The 131-year-old firm, Britain's largest clothing retailer by sales, publishes fourth-quarter trading figures on Thursday, when it is expected to report a fall in sales of general merchandise - clothing, footwear and homewares - of 1.2 percent from shops open over a year, according to a consensus of 10 analysts' forecasts compiled by the company.

That compares with a third-quarter decline of 5.8 percent, which reflected unseasonal weather in October and November and disruption at its e-commerce distribution center in December.

UK consumers are benefiting from low inflation, increasing real wages, healthy credit markets and low unemployment.

However, Next, Britain's second-biggest clothing retailer, said last week there was little evidence consumers were spending any increases in disposable income on clothes.   Continued...

Shirts from the new autumn/winter women's wear collection are displayed at Marks & Spencer's in central London July 25, 2013.  REUTERS/Olivia Harris