British retailer Marks & Spencer Group Plc (MKS.L) on Tuesday said its group sales for the third quarter increased 2.4 percent excluding value added tax or VAT, despite a challenging trading environment. The company backed its cautious full-year forecast, but lowered its gross margin view.
In its interim management statement for the 13 weeks to December 31, 2011, the company said its total UK sales excluding VAT rose 1.8 percent, helped by a 4.5 percent rise in food sales, slightly offset by a 0.8 percent decline in General Merchandise sales.
According to the company, food sales increased as customers chose to protect their spending on festive food, despite the pressure on their disposable incomes.
Chief Executive Marc Bolland 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."
Clothing sales edged up 1.1 percent, while home sales were down 13.3 percent primarily impacted by the company's decision to exit technology.
Like-for-like UK sales excluding VAT edged up 0.5 percent, as a 1.8 percent drop in General Merchandise was more than offset by 3 percent growth in food sales.
In the quarter, direct sales excluding VAT climbed 22.4 percent. The launch of Christmas Food to Order service on-line contributed to a 12 percent increase in orders.
International sales in the quarter grew 8.1 percent, reflecting continued growth in the priority markets of India and Shanghai, as well as in franchise business.
Looking ahead, Marks & Spencer said its expectations for full year 2011/12 profit remain unchanged. Meanwhile, gross margin will be lower than previously expected 'broadly flat' margin, due to the company's decision to invest in promotions in General Merchandise, offset by additional savings generated by on-going tight management of costs.
The company added that it continues to be cautious about the outlook for the year ahead and expects trading conditions to remain challenging citing the ongoing macro-economic uncertainty.
Marks and Spencer will report its fourth-quarter trading statement for the 13 weeks ending March 31 on April 17.
Marks and Spencer shares closed Monday's trading at 308.50 pence, down 2.20 pence or 0.71 percent in London.
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