It seems that it’s fast fashion, rather than middle-market apparel, that will persuade hard-pressed U.K. consumers to part with their disposable income.
That’s the picture that has emerged from two U.K. retailers’ quarterly trading updates Tuesday. While Marks and Spencer Group plc reported a 0.7 percent drop in its group sales in the 13 weeks to June 30, Asos.com, the online fashion retailer, reported a 31 percent rise in its total group revenues to 141 million pounds, or $222.8 million, in the three months to June 30. All dollar figures have been calculated at average exchange rates for the period.
Asos.com’s revenues were boosted by a 49 percent growth in its international business, where sales in the U.S. grew 83 percent. The firm’s U.K. sales rose 8 percent during the year to 48.1 million pounds, or $76 million. Nick Robertson, Asos’ chief executive officer, said Tuesday: “We remain positive in our outlook and continue to trade in line with expectations.”
In contrast, M&S’ figures were marred by its clothing category’s poor performance. M&S’ U.K. general merchandise sales, of which clothing is part, fell 5.1 percent during the quarter, while food sales rose 2.9 percent. International sales rose 0.9 percent in the period at constant exchange rates, but fell 3.5 percent at actual currency rates, due to the weakening euro.
M&S released percentage figures only today, and will release its half-year results in November.
The firm stated that clothing sales during the first quarter were affected by merchandising issues, but noted, “We have taken steps to strengthen the team, improve our buying and merchandising and bring stock back on target for the [fall] season.” M&S also pointed to Britain’s unseasonably cold weather, which led to a “highly promotional” environment in women’s wear during the quarter, affecting categories such as casual tops.
“Our food business has again performed strongly. General merchandise underperformed in a difficult trading season. We are confident we are taking the necessary steps to address this,” said Marc Bolland, ceo of M&S.
Asked to compare the two retailers and their quarterly results, Freddie George, an analyst at Seymour Pierce in London, said: “Asos has got its ranges right and is improving the quality of the product. M&S is a mature business and it is underperforming. They haven’t got their products and ranges right, and their re-branding efforts haven’t gained traction yet.” He added that M&S also saw a “huge” erosion in its margins in the quarter, while Asos saw margins improve.
M&S said it expects short term trading conditions “to continue to be challenging,” but its guidance for the 2012-2013 fiscal year remains unchanged. M&S’ shares closed up 2.1 percent to 3.27 pounds, or $5.10 per share, on the London Stock Exchange Tuesday following the news, while Asos’ shares shot up 12.6 percent to 18.51 pounds, or $28.90 per share.