British retailer Marks & Spencer reported a smaller-than-expected drop in first-quarter underlying sales on Wednesday and said consumer spending seemed to be stabilising, though it remained cautious on the outlook.
The 125-year-old M&S, which sells clothes, homewares and food from over 600 stores in Britain and about 285 abroad, said sales at UK stores open over a year fell 1.4 percent in the 13 weeks to June 27, after a fourth-quarter drop of 4.2 percent.
That was the seventh quarterly fall in sales in a row, but also the best performance since the second quarter of its 2007-08 financial year. Analysts had forecast a fall of 1.8-3.5 percent, according to a company poll of ten.
The improvement is unlikely to relieve pressure on executive chairman Stuart Rose, under fire from investors for combining the roles of chairman and chief executive last year against corporate governance guidelines.
Rose survived an investor rebellion last July, but faces fresh calls to share power at a meeting next Wednesday, July 8.
Three shareholder advisory groups — Glass Lewis, Pirc and RiskMetrics — have urged investors to back a resolution calling on Rose to appoint an independent chairman by July 2010.
On a conference call with reporters, Rose said he was focusing on running the business and "not concerned" by the row.
SHARES SEEN HIGHER
Traders said M&S shares were set to open 7-20 pence higher than Tuesday's close of 360 pence. The stock has lagged the DJ Stoxx European retail index by 9 percent over the past year, but has climbed about 50 percent this year on hopes of an economic recovery.
"They're (the Q1 numbers) better than expected. But the weather's been good, the comps (comparative figures from last year) softer and they've been cutting prices. So it's difficult to give them too much credit," said Pali International analyst Nick Bubb, who has a "sell" rating on the shares.
Britain's retailers are battling the deepest recession in decades. M&S, Britain's biggest clothing retailer, has admitted it was slow to respond, particularly in its upmarket food business, but has since made changes, such as more promotions.
Like-for-like general merchandise sales, spanning clothing and homewares, were down 2.4 percent, against a forecast drop of 3-5 percent. Food sales on the same basis were down 0.5 percent versus an expected decline of 0.5-4.2 percent.
"Consumer confidence appears to be stabilising. However, we remain cautious about the outlook for the remainder of this and next year and will continue to run the business accordingly," Rose said in a statement.
