M&S reports strong festive sales but says tax rises will lead to cost cuts

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Marks & Spencer has hailed a “good Christmas” with strong sales of food but warned it would have to find new ways of to cut costs in the face of the government’s tax increases.The UK retailer said sales at established food halls rose 8.9%, making its the top-performing high street grocer over Christmas, according to the analysts Kantar.Equivalent clothing, home and beauty product sales grew by 1.9% in the 13 weeks to 28 December, even as the clothing market fell 2% before Christmas.

M&S said sales records were broken, including its biggest-ever day of food trading – on 23 December – with some smaller stores struggling to cope with demand.Sales of meat, fresh fruit and veg and baked goods all grew by double digits.Clothing, home and beauty online revenues rose by almost 12% , but bad weather led to a 1.5% fall in sales in stores, the retailer said.M&S partywear, and premium menswear sales were up on last year, while denim and knitwear gained market share.

Stuart Machin, the chief executive, said: “This was another good Christmas for M&S, building on a strong performance in the prior year.” However, he added: “We’re not complacent.”The company said: “The external environment remains challenging.As we enter the new year, the outlook for economic growth, inflation and interest rates is uncertain and the business faces higher costs from well-documented increases in taxation.”The retailer’s shares fell 7% on Thursday amid a sell-off of consumer-facing companies’ stocks and as the pound tumbled to a 14-month low amid a sell-off in the bond market.

Machin added: “It is going to be a challenge for us but I do not see in M&S big job losses as we are a growing business.” Instead, the company will look more carefully at recruitment and attempt to improve the efficiency of its stores, distribution systems and supply chain to offset the higher costs.Machin said changes to national insurance being implemented in April would add £60m to the company’s costs, about half a total rise in wage costs, including an increase in the legal minimum wage.He said the tax changes announced in October’s budget were a “double whammy on national insurance we didn’t plan for”.Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionThe retailer said food prices could be affected, but it hoped to hold clothing prices steady and was prepared to take a hit on profit margins if necessary.

Retailers face a £7bn increase in their costs in 2025, the British Retail Consortium has calculated, and many will raise their prices.Food prices are forecast to climb by 4.2% on average in the latter half of the year, while non-food items are likely to increase in line with inflation, which stands at 2.6%.
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