In the run up to Christmas 2010 Britain was in the grip of some hideously bad weather. Snow was blocking roads and railway lines, countless people couldn’t get to work, and of those that could, many had to stay at home and look after children as schools were closed. Some for up to two weeks.
Consequently, high streets across the land were empty and the countries major retailers bemoaned their misfortune at what for them is the most profitable time of year.
That was the excuse Marks & Spencers gave for their worse than expected performances last Christmas. Surely 2011 couldn’t be a bad… could it?
The weather over December 2011 couldn’t have been more different than the previous year. The majority of the UK experienced average temperatures 5 °C higher than the same period last year. There was no snow to speak of and the High Streets were buzzing again.
Marks & Spencers CEO
Marc Bolland, who became Chief Executive Officer CEO of Marks & Spencer in May 2010 has had a tough time since he took office. Not to say that his predecessor Sir Stuart Rose would have faired any better in these tough times. Stuart Rose had been in charge of Marks & Spencers for 6 years after his return in 2004. Sir Stuart had started his career in retail at M&S and spent 17 years there before moving to the Burton Group in 1989. Sir Stuart Rose was awarded a Knighthood in the 2007 New Years Honours list, largely for his work in turning around M&S which was struggling when he rejoined.
Marks & Spencer Christmas Trading
In summarising their Christmas trading, M&S reported facing severe competition from their rivals who had cut prices earlier than other years and by more. Debenhams in particular has appeared to run promotions right throughout December and had stolen a march on its competitors. Debenhams reported a jump of 6.5% in like-for-like sales over the five weeks to 31 December, although that figure did include VAT. Over the longer period of 18 weeks to 7 January, Debenhams reported like-for-like sales, excluding VAT, were on a par with last year.
M&S reported like-for-like sales varied depending on the sector. Food had done well with a rise of 3% against last year, boosted by traditional Christmas fare such as party food and mince pies. Clothing sales were also up, but only just, they tiptoed up 1.1% on last year. M&S’s worst performing sector was homewares. Blamed largely on their decision to pull out of the consumer electricals market, homewares was down by a disappointing 13.3%. These combined to cause a drop of like-for-like sales of 1.8% in general merchandise.
Marks & Spencers Share Price
Despite falling sales, M&S still kept profits at the same level as last year by slashing 90m off their costs. Whilst this is good news for shareholders, cost cutting at this level isn’t sustainable and analysts are wondering what will happen next year. Meanwhile share prices struggle at around 330p, down about 45p on this time last year.
M&S chief executive Marc Bolland said the company had performed well in a “challenging” trading environment: “Our food business performed very strongly as customers enjoyed our new and traditional Christmas products.” Customers had saved money elsewhere so they could treat their families to a “special Christmas at home”.
With the economic forecast still looking bleak and with continuing worries about the Euro, M&S expects trading conditions to remain tough throughout this year. “We continue to be cautious about the outlook for the year ahead,” said Bolland, adding he was a “glass half full man” with the Olympics and Diamond jubilee celebrations hopefully being a boost to sales.
As one of the best loved names in the high street today, we wish M&S all the best for 2012 and I for one will be buying my mince pies there again this Christmas.
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