Marks & Spencer has hailed a “good Christmas” with strong food sales, but warned it will have to find new ways to cut costs in the wake of the Government’s tax rises.
The UK retailer said sales at established food halls rose 8.9%, making it the top-performing high street grocer over Christmas, according to analysts Kantar. Equivalent clothing, home and beauty products sales rose 1.9% in the 13 weeks to December 28, while the clothing market fell 2% in the run-up to Christmas.
M&S said sales records had been broken, including on its biggest day ever for food trading – on December 23 – when some smaller stores were struggling to cope with demand. Sales of meat, fresh fruits and vegetables, and baked goods increased by double digits.
The retailer said online revenue for apparel, home and beauty rose nearly 12%, but sales in stores fell 1.5% due to the bad weather. Sales of M&S partywear and premium menswear were up last year, while denim and knitwear gained market share.
Chief executive Stuart Machin said: “It was another good Christmas for M&S, building on last year’s strong performance.” However, he added: “We are not satisfied.”
The company said, “The external environment remains challenging. As we enter the new year, the outlook for economic growth, inflation and interest rates is uncertain and businesses face higher costs from well-documented increases in taxation.
Shares in retailers fell 7% on Thursday amid a sell-off in shares of consumer-facing companies and the pound fell to a 14-month low amid a sell-off in the bond market.
Machin said: “It’s going to be a challenge for us but I don’t see big job losses at M&S because we are a growing business.” Instead, the company will focus more on recruiting and try to improve the efficiency of its stores, distribution system and supply chain to offset higher costs.
Mackin said the National Insurance changes coming into effect in April would add £60 million to the company’s costs, almost half the total increase in wage costs including the increase in the legal minimum wage. He said the tax changes announced in the October budget were “a double whammy on national insurance that we did not plan for”.
After newsletter promotion
The retailer said food prices may be affected, but it expects clothing prices to remain stable and is prepared to take a hit to profit margins if necessary.
The Retail Consortium has calculated that retailers will face a £7 billion increase in their costs in 2025, and many will raise their prices. Food prices are projected to increase by an average of 4.2% in the second half of the year, while non-food goods are expected to increase in line with inflation, which is 2.6%.