M&S and Tesco ring up strong festive food sales but City reaction divided

The high street giant revealed that both the value and volume of food sales increased in the lead-up to Christmas - meaning shoppers spending more and putting items in their baskets. Food sales grew by 5.6 per cent over the 13 weeks to December 27, on a like-for-like comparison with the year before.

Christmas food ranges helped lift spending over the period, resulting in fewer markdowns and less waste than the previous year. M&S also highlighted the strength of its core grocery products and upgrades to ranges such as Italian ready meals, in-store bakery and deli items.

But the group’s fashion, home and beauty division failed to keep pace with its food business, with sales dipping by 2.9 per cent year on year.

M&S said online sales growth was offset by subdued spending in stores, which it partly attributed to “reduced high street footfall”. It also blamed the prolonged impact on its stock data and management systems following a major cyber attack last year.

Looking ahead, M&S said it plans to “reshape” the business for growth against an “uncertain consumer environment”, including by transforming its stores and reducing costs.

Chief executive Stuart Machin said: “A record number of customers shopped at M&S this Christmas. From the festive food shop, to picking up party outfits and gifts, millions more trusted M&S to deliver the family Christmas.

“Fashion, home & beauty is getting back on track as we work through the tail end of recovery. We enter this new calendar year full of ambition and laser-focused on our plan to reshape M&S for further growth.”

The M&S trading update came as supermarket giant Tesco hailed its highest market share for more than a decade as it notched up a rise in festive sales despite “intense” competition.

The UK’s biggest grocery chain reported a 3.3 per cent rise in UK and Ireland like-for-like sales over the six weeks to January 3, with growth of 3.2 per cent in the UK and 3.8 per cent across Ireland. Sales over its third quarter before the Christmas period lifted 4 per cent in the 13 weeks to November 22.

Richard Hunter, head of markets at investment platform Interactive Investor, said the two household names have had differing fortunes with share price reactions echoing that gap.

“Another robust performance from the Tesco juggernaut has, on this occasion, hit the wall of higher expectations,” he noted. “Metrics were mostly positive, but investors have chosen to focus on a relatively light period of growth by Tesco standards.

“M&S has yet to shake off its cyber hangover and although Christmas sales were solid, they were below estimates which is a slight disappointment. That being said, there is little doubting the ongoing resilience and strength of the food business, which accounts for 54 per cent of group revenues.”

M&S shares were up 3 per cent in early trading on Thursday while Tesco fell by 5 per cent.

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