Marks & Spencer, Britain’s biggest clothing retailer, attempted to drive Christmas trading by holding a rare one-day sale on the Saturday before Christmas, cutting prices on all non-food items by 30 per cent, a source close to the company said.
It was the first time in five years the group has tried the tactic at its 770 British stores. The last time was in 2008, when Stuart Rose, the chief executive at the time, was battling weak consumer demand during the financial crisis.
The strategy raised fears the firm has traded poorly in the crucial festive season so far, piling more pressure on current CEO Marc Bolland whose recovery plan around higher quality and more stylish fashions has so far failed to kickstart sales.
According to the source M&S will also continue to offer up to 50 per cent off selected beauty and Christmas gift items. M&S declined to comment on future promotional activity.
“With much of its non-food range on promotion anyway prior to Christmas, it is arguably not much of a step to just promote everything, despite the irritation caused to loyal customers who have paid full price in recent weeks,” said independent retail analyst Nick Bubb.
“Whether it will turn out to be worth doing that in the short term, just to try to save the CEO’s job, remains to be seen, but the M&S brand will suffer long-term damage.”
M&S is not alone among clothing retailers in promoting heavily in a tough retail market. Gap is currently on sale, offering up to 60 per cent reductions, while French Connection is offering up to 50 per cent.
Research by PwC found 72 per cent of 100 high-street retailers were on sale or advertising promotions in their shop window, such as three-for-two offers.
It said average price discounts being advertised were 46 per cent.
Whether it will turn out to be worth doing that in the short term, just to try to save the CEO’s job, remains to be seen, but the M&S brand will suffer long-term damage
Shares in M&S were up 1.5 per cent at 451 pence, valuing the 129-year-old business at £7.3 billion.
The stock has fallen 10 per cent over the last month, including three per cent over the last five days.
Though M&S’s food business continues to trade well, the firm has posted nine straight quarters of declining under-lying clothing sales and could report a tenth when it updates on third quarter trading on January 9.
Analysts had hoped that with the inclusion of the much vaunted new autumn/winter ranges, the firm’s third quarter to end-December would see general merchandise return to positive like-for-like sales growth.
The previous quarter had included the new range for just three weeks of the period.
Now, many analysts are forecasting a tenth quarter of decline, even though last year’s comparative numbers are weak. Freddie George, analyst at Cantor Fitzgerald, is forecasting a third quarter like-for-like general merchandise sales decline of 1.5 per cent and is also concerned that gross margins have been under pressure from discounting.
“The strategy of reducing the number of lines and backing the ‘winners’, which are highly geared to a cold-weather environment, including cashmere and coats, appears to have backfired as a result of the milder-than-expected weather over the last two months,” he said.
On December 20, he downgraded his 2013-2014 pretax profit forecast to £630 million from £645 million, retained his ‘sell’ rating and cut his price target to 425 pence from 445 pence.
Only a few UK clothing retailers, such as Next and SuperGroup, which have longstanding policies of not going on sale before Christmas, have refrained from price cuts.