Tesco and M&S report strong festive sales

Tesco and Marks & Spencer released interim sales figures on Thursday showing a strong performance over the Christmas period.

It comes after industry data last week showed that UK supermarkets had seen their busiest festive trading since before the pandemic.

Tesco, the country’s largest retailer, said that its UK sales were up 6.8% in the six weeks to 6 January 2024, including growth of 9.2% in the four weeks to Christmas, boosted by strong demand for items in its premium Finest range.

Including its third quarter to 25 November 2023, Tesco’s UK sales grew by 7.5%.

The supermarket raised its profit forecast for the full year to approximately £2.75bn, from the previous guidance range of £2.6bn to £2.7bn and the £2.49bn reported in 2022/23.

M&S reported an 8.1% rise in like-for-like UK sales over the 13 weeks to 30 December 2023, with particularly strong food sales and a good performance in womenswear.

In its outlook the company warned of economic uncertainty, with “consumer and geopolitical risks” as well as cost increases for wages and business rates.

“Nevertheless, the strong Christmas trading performance provides confidence that the results for the year will be consistent with market expectations,” M&S added.

Online sales tax would harm high street, says M&S

A proposed sales tax on online transactions would be counter-productive, according to Marks & Spencer.

Responding to a UK government consultation, the retailer said that a new online tax would “punish” the very retailers it is intended to support and leave them less money to invest in high street stores, BBC News reports.

The aim of the proposal is to rebalance the taxation of the retail sector between online and in-store retail. According to the Treasury, the proceeds would go towards funding a reduction in business rates for shops.

However, there are a number of issues that would need to be resolved, such as the different forms an online sales tax could take and how to define an online sale reflecting the range of transaction, delivery and collection options.

Due to close on Friday, the consultation explores these issues and the potential impacts of an online sales tax to help the government assess the case for and against implementing such a tax.

M&S chief financial officer Eoin Tonge said in excerpts seen by the BBC that traditional retailers have worked hard to diversify and grow their online sales.

He argued that an additional tax burden would make it harder for retailers to make the necessary investments to survive and grow in the modern, digital era.

“Introducing an additional tax on retail — already overburdened — will simply mean retailers cut their cloth accordingly,” he said.

“This rationalisation will always start with the least profitable parts of a business — which, in the case of multi-channel retailers, will more often than not be High Street stores.

“Therefore it is likely that, far from helping the High Street an online sales tax will damage shops and our high streets further, particularly in areas that require new investment to bring them back to life.”

M&S reports strong profit for first half

Marks and Spencer has returned to profit and said its turnaround plan was starting to pay off.

The high street retailer reported pre-tax profit of £187.3m for the six months to October, the first half of its financial year. That’s an increase from the loss of £87.6m for the first half of last year and profit of £158.8m in the same period two years ago, before the pandemic.

Chief executive Steve Rowe said that the company’s underlying performance was improving, with its main businesses “making important gains in market share and customer perception”.

UK food sales increased by 10.4% compared with the pre-pandemic period, while UK clothing and home sales were down 1.0% due to lower footfall, offset by strong online sales.

The company is optimistic about the future of its clothing and home operations, stating that the re-engineering of the business “is now demonstrating its potential to reverse years of decline”.

Rowe acknowledged the effect of the bounce-back from the pandemic “as well as the headwinds from the pandemic, supply chain and Brexit, some of which will continue into next year”.

To address supply chain issues, M&S said it had deployed several recruitment projects and incentives to attract new drivers. The company anticipates “significant supply chain cost increases” in the second half of its financial year with additional costs next year, but said its food business was “comparatively well placed” to deal with the challenges.

Looking ahead, M&S expects full-year pre-tax profit to beat expectations and has increased its guidance from £350m to £500m.

M&S set to close up to 30 stores

Marks & Spencer has reported a loss of £201m in the 52 weeks to 27 March 2021, down from a profit of £67m in the previous year.

The results reflect a year impacted by the Covid-19 pandemic, with clothing and home sales down 31%. Performance improved in the second half as online growth made greater inroads into the store sales decline, M&S said.

Food sales increased thanks to the retailer’s online delivery tie-up with Ocado, which added £78m of profit.

The chain currently has 254 full-line stores, selling clothing and home ranges as well as food, and is aiming to cut this number to around 180.

As part of its turnaround plan, about 30 stores will close over the next decade and another 80 will be relocated to a “food only” store or another full-line store in a better location, or merged with nearby shops.

The 137-year-old group will also open 17 new or expanded full-line stores over the next two years, including a number of former Debenhams sites.

“We are committed to stores and believe they can be a true source of competitive advantage,” chief executive Steve Rowe told investors and journalists on a conference call.

“But they need to be the right stores, in the right location, with the right services.”