Marks and Spencer Christmas sales boosted by food

Marks and Spencer has reported a modest rise in UK sales over the Christmas period, after strong food sales offset weaker trading elsewhere at the firm.

The company also said margins would be lower this year due to promotions.

Elsewhere, Debenhams said sales were flat over the Christmas period, while Game Group saw sales slump.

Separately, the British Retail Consortium (BRC) said December retail sales in the UK rose by 2.2% after a "dazzling" final week before Christmas.

However, the figure was boosted by the comparison with weak sales a year earlier and by heavy discounting, the group said.

'Cautious' outlook

M&S said it had performed well in a "challenging trading environment".

Like-for-like sales, which strip out the impact of any new store openings, for the final 13 weeks of 2011 were up 0.5% on a year earlier. Food sales were up 3%, while general merchandise sales fell by 1.8%.

The decline in general merchandise sales was not helped by a 13.3% slump in sales in its home division, which the company blamed on its decision to stop selling technology products.

Total sales at its direct delivery business jumped by 22.4% after it extended its next day delivery deadline and launched an online Christmas food order service.

Outside of the UK, sales rose by 8.1%.

"Our food business performed very strongly as customers enjoyed our new and traditional Christmas products," said M&S boss Marc Bolland.

"In clothing, our focus was on offering our customers real value at a time when they're managing their budgets carefully. Our trading strategy worked well, delivering a record performance in many categories including menswear and sleepwear."

The company said it expected trading conditions to remain challenging and was "cautious" about the year ahead. It added that it expected to hit its profit targets for the year.

Analysts also stressed the potential impact of discounting on profits.

"Overall, this is a subdued set of results," said Neil Saunders at retail research group Conlumino.

"There is no denying that growth has, to a degree, been bought at the expense of margin.

"These results demonstrate that while M&S is far from being in the premiership in growth terms, it can still play a reasonably good game."

Mixed fortunes

Debenhams said it had seen record sales in the week before Christmas

Elsewhere on the High Street, department store chain Debenhams said like-for-like sales in the 18 weeks to 7 January had been flat.

The company said it was "pleased with this performance".

"We traded well despite the difficult environment as evidenced by strong sales in December, including record sales in the final week before Christmas," said chief executive Michael Sharp.

The Co-operative Group reported a 3.1% rise in like-for-like sales, including VAT, at food stores in the four weeks to the end of December. Chief executive Peter Marks said the figures represented "encouragingly good performance" given the competition in the sector and the "difficult economic times".

Majestic Wine reported like-for-like sales growth of 4% for the nine weeks to 2 January. Company boss Steve Lewis said he was "delighted" with the growing number of customers shopping at chain.

However, troubled video game retailer Game Group reported a slump in Christmas sales.

For the eight weeks to 7 January, like-for-like sales fell by 12.9%. The company also said promotional activity had hit margins, which would now be almost 2% lower for the full year.

The group also said difficult trading conditions had raised the likelihood that it may breach some of its banking covenants when they are next tested on 27 February.

Game Group struggled last year and has seen its business eroded by competition from online-only retailers such as Steam and Amazon.

Margins hit

The BRC said its sales figures for December were boosted by the comparison with weak sales a year earlier, which were hit by snow.

Sales last month were also boosted by heavy discounting as retailers cut profit margins in a last-minute attempt to clear stock ready for the new season.

"A better-than-hoped for December closed a relentlessly tough year for retailers, but these figures hinged on a dazzling last pre-Christmas week and were boosted by some major one-off factors," said Stephen Robertson, director general of the BRC.

"We're not witnessing any fundamental change in customers' circumstances."

He added that discounting had been deeper and had started earlier than in 2010.