Marks & Spencer CEO: Sales are up but we remain cautious

Marks & Spencer saw sales increase over the last three months, helped by celebrity endorsements from the likes of the England football team and ex-player Jamie Redknapp as well as the World Cup. But new boss Marc Bolland admitted that the recent budget has made the company cautious about the outlook for consumer confidence and spending.

Presiding over his first set of figures since being lured away from supermarket Wm Morrison, Bolland announced M&S's third consecutive quarterly rise in sales. The rate of growth in the 13 weeks to 3 July, however, was slightly slower than in previous quarters.

Bolland said he does not expect there to be a "double-dip" recession, but M&S is keeping a keen eye on consumer confidence by carrying out in-depth customer surveys every month.

In the 13 weeks to 3 July M&S's first quarter overall group sales were up 4.4%. Excluding newly opened stores, its like-for-like sales in the UK were up 3.6%, a slightly better than expected performance which was boosted by strong sales of clothing. In the previous quarter, however, sales were up 5.1%.

Total UK sales were up 4.8%, with general merchandise sales up 7% clothing sales rose 7.4% and homeware sales up 4.1% and food sales up 2.9%. On a like-for-like basis general merchandise sales were up 6.0% and food up 1.5%.

The retailer has scored some notable successes in clothing by relying on celebrity endorsement. In May, footballer-turned-Sky Sports pundit Jamie Redknapp became the face of M&S menswear and he has already helped sell 38,000 polo shirts. M&S also sold 5,000 replicas of the suits worn by the England football squad, despite the team's disappointingly early exit from the tournament.

The World Cup also saw M&S launch a promotion for branded beers which had a surprising knock-on effect on its own-brand beer one of many recently introduced lines for the retailer. Sales of M&S beer doubled during the promotion of branded beers.

"Marks & Spencer has delivered another good sales performance in the first quarter, continuing the progress made by the team over the previous year," said Bolland, whose appointment was announced last year although he only took over from Sir Stuart Rose on 1 May. "We have continued to grow market share across all parts of the business as customers recognised the strength of the Marks & Spencer brand and the great quality and value it represents."

Bolland also confirmed that he will provide investors with a strategic update on his plans for the business in November.

The company said in its trading update that it has made a good start to the financial year, "but following the recent budget and the actions proposed to reduce the national deficit, including the increase in VAT, we are cautious about the outlook for consumer confidence and spending and continue to manage the business accordingly".

Speaking in a conference call with analysts, Bolland said "we are not jumping to conclusions after only a couple of weeks" since the budget.

"We know that consumers were concerned to see the measure of VAT being taken to 20% but we will not see the impact now, but in a period of time we will get more clarity on that," he added.

But M&S is ensuring that it can react quickly to any change in consumer sentiment. Since May, M&S has been carrying out a monthly survey, or "barometer", of consumer sentiment. Bolland said it is too early to draw any definite conclusions from it as yet it only has one set of data from before and one set from after the budget but it will be invaluable in future.

But he stressed the retailer remains "very cautious" about the economic environment in the UK.

The trading update comes ahead of the company's annual meeting next week at which shareholders are expected to criticise the pay packets offered to executives. Corporate governance advisory body Pirc has urged shareholders to vote against the retailer's remuneration report describing executive pay as "highly excessive". Bolland could earn up to 15m in his first year, with 4.9m guaranteed, regardless of performance.

Last week, Tesco suffered the largest shareholder rebellion the City has seen so far this year as nearly half of shareholders (47%) voted against its boardroom pay policy or abstained. Almost a third cast their vote against the remuneration report and another 15% withheld their vote.

But Rose, who remains as M&S chairman, said on Wednesday that he is confident that all the resolutions will be passed at the AGM "adequately".

Over the 13 weeks to 3 July, M&S said its market share in general merchandise increased 50 points to 10.7%, with growth shared across all areas of clothing.

In food, M&S continued to outperform the market on a like-for-like basis and the retailer launched 570 new products including grill and summer dessert ranges.

M&S Direct, meanwhile, had a strong quarter with sales up 49% and its "Shop Your Way" multi-channel ordering service, is now in more than 400 stores.

International sales were up 0.9%, although hit by adverse currency movements and continued difficult trading conditions in certain markets.