M&S Provides Glimmer of Hope as U.K.’s Retail Woes Deepen

(Bloomberg) --

Marks & Spencer Group Plc’s efforts to turn around its troubled clothing business showed signs of life in the autumn, boosting the U.K. retailer after a weak first half of the year.

The division’s full-price and planned promotional sales rose 2.7% in October, the company said Wednesday. The shares gained as much as 7.9% in early London trading, though they’re still down by about one-third over the past 12 months.

The update follows a series of setbacks in M&S’s apparel business, where sales fell more than analysts expected in the first half even as the food unit beat estimates. The company has been trying for years to turn around the clothing arm, which has wrestled with problems ranging from an inadequate supply chain to a bloated real-estate portfolio that it’s pared back by closing dozens of stores.

M&S’s report followed news late Tuesday that baby-products retailer Mothercare Plc is shutting its U.K. operations, threatening 2,500 jobs and adding to the toll on the country’s shopping streets. British retailers are in crisis as consumers defect to Amazon.com Inc. and political turmoil around Brexit undermines confidence.

M&S’s October results provide a glimmer of hope, suggesting that recent supply-chain issues are under control and that customers liked the new ranges for autumn and winter, Morgan Stanley analysts including Geoff Ruddell said in a note.

Product Line

Chief Executive Officer Steve Rowe said the October performance was driven by simplification of the product range and improved fit and style. But he cautioned that M&S is about 18 months behind schedule on its turnaround plan, and the clothing and home business remains a weak link.

“There’s far-reaching change spanning every part of the business and the transformation is running at a speed and scale not seen before at M&S,” Rowe said on a call with reporters. “There’s a lot to do, and it will take some time.”

M&S’s year has been marked by high-profile exits, with the head of clothing and chief financial officer leaving, while the shares dropped out of the benchmark FTSE 100 index. A tie-up with online food retailer Ocado Group Plc was unveiled as a key e-commerce driver, but questions remain over how transformative the deal will be.

--With assistance from Lisa Pham.

To contact the reporters on this story: Eric Pfanner in London at epfanner1@bloomberg.net;Rebecca Smith in London at rsmith599@bloomberg.net

To contact the editors responsible for this story: Sunil Kesur at skesur@bloomberg.net, Anne Pollak

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