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By
Reuters
Published
Oct 7, 2010
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M&S pins hopes on older shoppers in tougher times

By
Reuters
Published
Oct 7, 2010

LONDON, Oct 7 (Reuters) - Bellwether British retailer Marks & Spencer (MKS.L) said it is hoping its older customer base will see it through the gathering storm of public sector cuts and tax rises as it beat forecasts for second-quarter sales.

M&S
Twiggy, Ex-CEO Stuart Rose and Erin O'Connor opened Marks & Spencers at the Westfield London Shopping Centre in October 2008. Photo : Corbis

"Our customers are a bit older and what we see clearly from our market data is that older customers are concerned about cuts but better prepared than younger customers," Chief Executive Marc Bolland told reporters on Thursday.

Echoing comments this week from Tesco (TSCO.L) and J Sainsbury (SBRY.L), Britain's No. 1 and No. 3 grocers respectively, Bolland said he did not expect government spending cuts, to be unveiled on Oct. 20, to tip the economy back into recession.

"No, we don't expect a double dip. Yes we expect customers to have a more difficult trading environment but we expect to be well positioned," he said.

Britain's biggest clothing retailer, which also sells upmarket foods and homewares, said underlying sales increased 5.3 percent in the 13 weeks to Oct. 2, its fiscal second quarter.

That was the fourth consecutive quarterly rise, up from 3.6 percent in the first quarter and against analysts' average forecast of 3.2 percent in a company poll.


RISING OPERATING COSTS

But despite topping forecasts M&S, which serves 21 million Britons a week from over 650 stores and has about 300 shops abroad, said its full-year financial expectations were unchanged as the better trading was offset by rising operating costs.

The firm said these would be towards the top end of its forecast range of up 4 to 5 percent because of a step-up in marketing activity and higher sales volumes.

"We are facing increased commodity prices and significantly tougher comparatives in the second half. As a result we remain cautious about the outlook for the remainder of this year and next," it said.

Shares in M&S, which have lagged the STOXX 600 European retail index .SXRP by 13 percent this year, were flat at 390.9 pence at 0841 GMT, valuing the firm at about 6.14 billion pounds.

Citi analysts said M&S shares already trade at a premium to rivals, and saw no change to analysts' full-year consensus profit forecast, which stands around 702 million pounds ($1.1 billion), according to Thomson Reuters I/B/E/S.

British bicycles to car parts retailer Halfords (HFD.L) on Thursday posted a 6.3 percent drop in second-quarter underlying sales, although Sainsbury (SBRY.L) said on Wednesday it thought austerity measures were already embedded into shopping habits.

M&S said its growth was driven by a 70-basis-point increase in market share in clothing, helped by new products such as the "2 sizes bigger" bra and "Miracle" crease resistant linen.

Food market share also rose 10 basis points, while online sales surged 49 percent.

Like-for-like British general merchandise sales, which include clothing and homewares, jumped 7 percent, while food sales rose 3.7 percent on the same basis.

Group sales were up 6.5 percent, including a 6.2 percent increase from international stores.

Bolland, who joined in May from grocer Wm Morrison (MRW.L), will outline his thoughts on future strategy alongside interim results in November.

He gave no hints on this beyond stating his plan was for "evolution not revolution".

(Editing by David Cowell, Mike Nesbit) ($1=0.6354 pounds)

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