Marks & Spencer tightens its belt for tough times

Marks and Spencer managed to post a 2.4% rise in sales in the 13 weeks to 31 December but it warns that challenging conditions remain.

In a trading update covering the crucial festive period, the retail bellwether said deep discounts had successfully enticed cash-strapped shoppers to its stores. It said the loss in profit margins on goods will be offset by additional savings generated by ongoing tight management costs.

Direct sales were the biggest driver of performance, rising 22.4%. M&S said this owed to the fact it had made its even more convenient for its customers to shop with it, through the extension of the next day delivery deadline and the launch of its Christmas Food to Order service on-line, which contributed to a 12% increase in orders.

Elsewhere clothing sales were up 1.1% and food sales rose by 4.5%. International sales rose 8.1%, reflecting continued growth in its priority markets of India and Shanghai. It also said it had a very good start to its new opened flagship store in Paris.

However, homes sales were down 13.3%, primarily down to the firm's decision to exit technology.

The figures left M&S on course to meet its full-year profit targets and we welcomed in the City as shares rose by 2%, or 6.5p, to stand at 315p at 8.45am.

Overall the firm's chief executive Marc Bollard was pleased with the numbers as the firm's braces itself for tough times ahead.

Bollard said: 'Marks & Spencer performed well in a challenging trading environment. Our food business performed very strongly as customers enjoyed our new and traditional Christmas products. This unique offer, coupled with our great deals, gave them more choice than ever before for a special Christmas at home.

'In light of the ongoing macro-economic uncertainty, we expect trading conditions to remain challenging. We continue to be cautious about the outlook for the year ahead. Our focus will be on offering our customers great value and quality at a time when they are managing their budgets carefully.'