Marks & Spencer hopes to gain from retrenchment

London: Marks & Spencer Group, the UK's largest clothing retailer, reduced its sales forecast to a level anticipated by analysts as it reins back expansion in its domestic market amid a slump in consumer spending.

Revenue will increase by £1.1 billion (Dh4.03 billion) to £1.7 billion in the three years through March 2014, the London-based retailer said yesterday. That's down from a November 2010 forecast for growth of £1.5 billion to £2.5 billion.

Analysts' estimates

Analysts had estimated sales of £10.8 billion in fiscal 2014, according to the average of 21 estimates compiled by Bloomberg, compared with £9.7 billion last year.

The reduction in the goal "is not as bad as feared," Caroline Gulliver, an analyst at Execution Noble in London, said by phone. She has a buy recommendation on the stock.

Marks & Spencer rose as much as 2 per cent in London trading after the retailer also reported profit that beat estimates.

Chief executive officer Marc Bolland plans to ramp up the company's online and international presence to compensate for UK conditions that he predicts will be tougher than forecast. Marks & Spencer said yesterday it will invest £200 million less than planned expanding its UK store space over the next two years, with a focus on its small-format Simply Food outlets.

Pre-tax profit

The shares were up 0.2 per cent at 339 pence in midmorning in London, extending their gain this year to 9 per cent.

Underlying pretax profit fell 1.2 per cent to £705.9 million in the year through March, the London-based company said, the first decline in three years. That beat the £693.4-million average estimate of 21 analysts compiled by Bloomberg.

A "challenging environment" caused the retailer to offer discounts of as much as 25 per cent off knitwear at its 700 outlets over the peak Christmas period to match competitors.

Domestic sales dip

UK retail sales fell the most in more than a year last month as poor weather and consumer caution on spending curbed demand at stores, according to the British Retail Consortium.

"It's been a tough start" to the quarter, Bolland said.

The retailer said it plans to increase UK selling space by 3 per cent this fiscal year, reducing to about 2.5 per cent the following year and a further reduction thereafter. It had previously expected to increase domestic space by about 3 per cent a year through 2015.

Spending on international stores will increase by £50 million in the three years through March 2014, the retailer said, with four new leases signed in Paris.

About 100 new international stores are planned this year, including in India and China, and M&S will have ten different language-specific websites by the year-end.