MARKS & Spencer chief executive Marc Bolland's attempt to restore the retailer's tattered fashion credentials has yet to pay off as the 130-year-old company reported its 10th consecutive quarter of falling general merchandise sales.
But shares in Britain's biggest clothing retailer rose 16p or 3.6% to 460.9p as the City's worst fears were not realised thanks to a pre-Christmas discounting drive. This is still substantially off its 52-week share price high of 520.5p hit in September.
M&S, which has 24 stores and 22 Simply Food outlets in Scotland, said like-for-like sales of non-food products such as clothes, footwear and homeware, were down 2.1% in the three months to December 2,8 compared to the same period last year.
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In the shorter eight-week period to Christmas Eve general merchandise sales were up 0.5% on a like-for-like basis.
This was M&S's third consecutive Christmas season of declining sales, although the company put some of the blame on a warm October, which muted demand for winter clothing.
It admitted that its pre-Christmas discounting drive would mean a flat UK gross margin guidance for this financial year, not the 30 to 50 basis point rise in UK gross margins it had previously guided to.
Mr Bolland said: "We delivered an improved performance in general merchandise over the important Christmas period, with sales up 1.5% in a highly promotional market.
"However, an exceptionally unseasonal October, which saw GM (general merchandise) sales down strongly, has resulted in a quarterly performance below our expectations."
M&S placed much importance on a heavily marketed autumn/winter range, which was purported to have greater fashion credentials and higher quality materials.
James McGregor, director of consultancy Retail Remedy, said: "Marc Bolland set December 2013 as the turning point for M&S's general merchandise offering but, take away the heavy Christmas discounting, and the retailer is still struggling in this area."
He added: "The customers M&S wants to attract are more attuned to the aesthetics and ambience of Next, House of Fraser and Zara, not the lifeless, confusing and commodity-driven racks still found within the majority of M&S stores."
Aside from its margins, M&S said all its other guidance to investors was unchanged and it avoided a profit warning thanks to a solid performance from its food division.
Its food arm saw sales rise 1.6% year-on-year for the 13 weeks to December 28, although this was a slowing on the previous quarter.
Analysts were, on average, forecasting a pre-tax profit of £645 million for the 2013-14 financial year. However, some signalled yesterday that they were preparing to cut their predictions.
Trading updates released in recent days have revealed a split among retailers.
Fashion retailer Next and department store chains John Lewis and House of Fraser reported strong trading, But Debenhams issued a profit warning.
Mr Bolland has consistently cautioned that the turnaround of M&S's clothing business would take time, a message he repeated yesterday, and would not be secured by one clothing collection.
"The step-by-step approach to improve our general merchandise is slowly improving but we have always said it will be step-by-step," the Dutchman said.
"Our market share has been stabilised over the quarter and it has even been, for womenswear, slightly improved."
Mr Bolland said the retailer's largest shareholders understood the company was undergoing a major transformation that would take some time.