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M&S expected to see a drop in annual profits after short-lived sales revival

M&S cheered its first rise in clothing and home sales for nearly two years in January but this is maybe a a temporary reprieve as the timing of Easter is set to have impacted its fourth quarter trading.

Analysts predict clothing and home sales fell by 3.3 per cent in the three months to the end of March, against a 2.3 per cent hike the previous quarter. Food sales are likely to have fallen by close to 1 per cent in the final quarter. This will see the group's year end on a sour note, with underlying pre-tax profits also set to dive 13 per cent to £593 million from £684 million the previous year.

Chief executive Steve Rowe has already warned that profits would take time to recover as its clothing turnaround beds in, but the third quarter trading gave hope that it is beginning to turn the corner. Analysts at Numis Securities say stripping out the effects of this year's Easter, clothing sales are likely to have been close to flat, while Peel Hunt believe underlying sales rose by 0.5 per cent.

Jonathan Pritchard at Peel Hunt points out sales will have regained their poise" since Easter-affected fourth quarter and they think the immediate changes that management made to the offer, merchandising and service are starting to resonate with customers. M&S has recently poached the chief executive of Halfords Jill McDonald to lead the turnaround in its clothing business.

 
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