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Last Updated: Tuesday, 10 July 2007, 17:57 GMT 18:57 UK
M&S faces 'challenging' trading
M&S store
M&S said its plans were unchanged despite tough trading conditions
Retail giant Marks and Spencer has said that trading conditions will remain "very challenging" after reporting a slowdown in UK sales growth.

M&S said UK like-for-like sales - which strip out the impact of new stores - rose 2% in the 13 weeks to 30 June.

The increase was the lowest for nearly two years and compared with growth of 8.2% a year ago.

The retailer said rising interest rates and "extreme weather" had combined to make trading volatile in the quarter.

Tough times

Analysts have been predicting a tougher time for all High Street retailers, following five interest rate rises in the past year - and with the wettest June on record dampening sales of summer clothes and food.

M&S has enjoyed a renaissance since chief executive Stuart Rose took charge in 2004 - posting a 28.5% increase in annual profit to 965.2m last year - but it has not been able to avoid the tougher trading environment.

You're bound to slow down in real terms if you've made great progress the year before
Stuart Rose, M&S chief executive

"Rising interest rates, general uncertainty over consumer spending, and extreme weather conditions combined to make market conditions particularly volatile over the quarter," Mr Rose said.

"We believe that the short term trading environment will remain very challenging, but our plans are unchanged," he added.

However, Mr Rose denied that M&S was running out of steam and told the BBC that the figures had to be seen in context.

"You're bound to slow down in real terms if you've made great progress the year before," he said.

M&S shares ended Tuesday up 1.4% to 641.5p after City analysts said the trading figures were not as bad as had been feared.

"M&S continues to lead something of a charmed life at present. The actual numbers are sluggish by their own standards, but much of the sting had already been taken out of the news ahead of today," said Richard Hunter at Hargreaves Lansdown Stockbrokers.

"And there are, indeed, reasons to be optimistic. Growth in international sales and the home section were particularly notable, overriding the slowdown in food."

Overseas expansion

M&S said like-for-like sales at its general merchandise division were up 2.9% during the period, while like-for-like food sales rose by just 0.7%.

Including all stores, clothing sales rose 3.5% over the quarter, the home section saw sales up 13.4% and food sales climbed 8.5%.

During the 13 weeks, M&S opened 33 more Simply Food stores, including 21 on BP forecourts.

M&S said its international sales had "performed well" over the period, with sales rising by 14.8%.

It opened 10 stores during the period, including its first stores in Lithuania, Taiwan and Ukraine.

The retailer added that its store modernisation record was on track for it to have 70% of its outlets revamped for the crucial Christmas trading period.

There was no mention in the trading update about the future of George Davies, designer of the firm's Per Una range, but Mr Rose said he was set to meet Mr Davies later this week

Recent reports have suggested that Mr Davies is not planning to renew his contract in the autumn.




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