Comment: Primark and Marks & Spencer square up

Marks & Spencer managed to please with Tuesday’s interims, but primarily because of relief that the results were not as bad as expected.

The retailer’s chiefs can take encouragement from evidence that changes made to the general merchandise division are starting to show through. After a 5.1% slide in sales in the first quarter, a 0.1% advance in the second was a good result.

Similarly, general merchandise gross margin was up as initiatives taken to control markdown bore fruit.

However, M&S still has much to do to return to form and warned the crucial second half of the year is likely to be marked by a step-up in promotions across the industry.

The extent of competition that M&S faces in apparel was highlighted by Primark’s full-year figures, released the same day. The value fashion giant recorded like-for-like growth of 3% versus M&S’s six-month like-for-like decline of 4.3% in general merchandise.

Primark’s sales and operating profit both climbed by 15%. The operating profit margin of 10.2% was equal to the previous year, and the new financial year has got off to an “encouraging” start.

While M&S’s international sales growth disappointed some analysts, Primark reported a “buoyant” performance at its shops in continental Europe, and its Berlin opening was “the most successful first day’s sales ever”.

There remain big differences between the customers M&S and Primark serve, but the gap has narrowed and will probably continue to do so.

M&S has overhauled its general merchandise team – this week it revealed that Victoria’s Secret chief creative officer and Knickerbox founder Janie Schaffer will join as lingerie and beauty director – but changes made will not show through to shoppers until next summer.

Between now and then, Primark is unlikely to ease the pressure. New stores such as at the east of Oxford Street show a retailer at the top of its game. M&S can take some relief though from the fact that Primark doesn’t sell food.