Marks & Spencer posted a smaller-than-expected fall in fourth-quarter underlying sales, raising hopes the landmark retailer is finally getting to grips with its problems despite a tough trading outlook.
The 125-year-old firm, which serves more than 21 million people a week from over 600 stores, said yesterday sales at stores open for at least a year fell 4.2 per cent in the 13 weeks to March 28.
That is an improvement on the 7.1 per cent drop in the third quarter and beat analysts' forecasts for a decline of between 6.5 and 7.5 per cent, according to a company poll.
Executive chairman Stuart Rose told reporters the overall market had not improved and the outlook remained uncertain, but said he was "hopeful" the improving trend would continue in the first quarter of the new financial year.
Traders said shares in Marks & Spencer, the biggest clothing retailer, would open up as much as four per cent.
Many retailers have been struggling as shoppers cut spending amid rising unemployment, sliding house prices and fears of a long and deep recession.
Fashion and homewares group Laura Ashley said yesterday its annual underlying profit fell 39 per cent, while Clinton Cards posted a 46 per cent drop in first-half net profit before tax, but crucially extended bank agreements.
M&S has been hit particularly hard, in part because of self-confessed mistakes in its upmarket food business.
These mistakes have piled pressure on Mr Rose, who was already under fire from investors for combining the jobs of chairman and chief executive against corporate governance best practice.
M&S's like-for-like general merchandise sales, comprising clothing and homewares, fell 4.8 per cent after an 8.9 per cent drop in the third quarter, while underlying food sales were down 3.7 per cent, having fallen 5.2 per cent the previous quarter.
Adjusting for the timing of Easter would add about 0.7 percentage points to both measures, M&S said.
"Our customers are responding positively to the actions we have taken," Mr Rose said in a statement, highlighting the group's popular "Dine In" food promotions and the success of its new Portfolio womenswear range.
M&S said it had held its clothing market share in the year ended last March.
Shore Capital analyst Kate Calvert, however, was not convinced.
"Sales are much better than expected, but there has been margin investment and it's also been offset by cost pressure," she said, keeping a "sell" rating on the shares.
M&S finance director Ian Dyson said he was comfortable with analysts' current consensus profit forecast for 2008-9, which is £592 million, according to a company poll.
Forecasts were over 1 billion a year ago and profits are tipped to fall again in 2009-10 to 454 million.
M&S shares have underperformed the DJ Stoxx European retail index by 14 per cent over the past 12 months, but have been the FTSE-100's strongest performing retail stock this year on hopes of an eventual recovery.
The shares closed at 264.50 pence on Monday, valuing the business at about £4.2 billion.
M&S shares have underperformed the DJ Stoxx European retail index.SXRP by 14 per cent over the past 12 months, but have been the FTSE-100's strongest performing retail stock this year on hopes of an eventual recovery.