Tailor-made turnaround for M&S

MARKS & SPENCER has stunned the City with a much higher-than-expected increase in clothing sales for the final quarter of the year - but warns it still has a long way to go to recovery.

Sales of clothing rose by 16.5% for the 11 weeks to 30 March, while food sales, which were up against an exceptionally strong quarter in 2001, rose by 6%.

On a like-for-like basis total sales were up by 10.6%, bettering the 7% achieved in the third quarter, which included Christmas. Turnover across the full year is up by 4.5%, or 4% on a like-for-like basis.

Chairman and chief executive Luc Vandevelde said he was delighted by the customer reaction to the new collections. 'Sales growth in clothing was predominantly driven by womenswear and menswear which both outperformed the market.'

He praised the 'Perfect' campaign that has spearheaded the relaunch of the M&S classic collection as well as George Davies's Per Una, now available in 139 stores, and the Blue Harbour range for men.

But Vandevelde stressed that M&S still has far to go. 'While pleased with our progress, I recognise our performance was helped by the buoyant trading conditions and the fact we were up against weak comparatives in the fourth quarter of the year,' he said. 'We still have a long way to go to recover lost ground.'

In particular, he stressed the need to reform the group's financial services division. Turnover for the full year was down by 4% as competition for loans proved tough. 'There is a need for us to tackle financial services in a more strategic way,' he said, promising to reveal more details with the full-year results on 21 May.

'I see financial services as one of the biggest potential opportunities for M&S. We need to come up with a strategy that has greater synergies with our core retail services.'

Marks warned that consumer spending levels may not continue to be so high during the rest of the year and said that the clothing comparatives will become more challenging as the year progresses.

There are unlikely to be any more major strategic changes to the clothing range. Rather, M&S will concentrate on bringing more clothing under the Perfect banner. At the moment 60% of men and womenswear has been overhauled. The aim is to make that 90% by the end of the year.

The shares were up 9 3/4p to 410 1/4p.

Back to basics for Perfect recovery