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Marks and Spencer Group Plc Rises On Strong Food And Online Sales

Marks and Spencer (LSE: MKS) (NASDAQOTH: MAKSY.US) this morning published an interim management statement for the third quarter, to 28 December 2013, and its share price is currently up close to 3.5%.

Group sales for the third quarters rose 1.8%, UK sales rose 1.5% (but were down 0.2% on a like-for-like basis), with food sales up 4.1% (1.6% on a like-for-like basis). 

But what the company describes as an “exceptionally unseasonal October” and “higher than ever levels of discounting” saw sales of general merchandise fall 1.1% (down 2.1%, like-for-like), resulting in an overall quarterly performance that was “below expectations”.

However, trading in the 8 weeks leading up to Christmas saw an improvement in general merchandise sales, which rose 1.5% (0.5%, like-for-like), together with 4.1% growth and record sales in food — including an all-time single-day high of £64m on 23 December — helped push group sales for the Christmas period up 3.2%.

 The company’s online operation, M&S.com, grew sales by almost 23% over the quarter — orders from tablets were up by over 100% and those from mobile phones grew over 80% — and international sales were up 4.5%.  Marks and Spencer’s .com business is already benefitting from a new e-commerce distribution centre, and the company hopes that the launch of a new web platform in the spring will further drive the company’s goal of becoming an “international, multi-channel retailer”.

The company now expects its full-year gross margin in food to be slightly ahead of the previous guidance, which was a rise of of 50 to 60 basis points. But the gross margin for general merchandise is now expected to fall by 30 to 50 basis points, because of “investment in promotional activity”.  Overall, the company anticipates that  full-year UK gross margin will be broadly level with last year’s.  And given what it described as “continued pressure on disposable incomes”, Marks and Spencer says it remains “cautious” about the outlook.

At 460p, the share price of Marks and Spencer is up over 22% on this time last year and 85% on five years  ago, comfortably beating the FTSE 100 index’s 10.3% and 51% gains over the same periods.

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> Jon doesn't own shares in Marks and Spencer.