British retailer Marks and Spencer said trading conditions would get tougher as austerity measures hit consumers, as it beat forecasts with a 5.3 per cent rise in second-quarter underlying British sales.
Britain's biggest clothing retailer, which also sells upmarket foods and homewares, said its full-year financial expectations were unchanged despite the strong second quarter and a rise in operating costs would be towards the top end of its forecast range of 4-5 per cent.
"Consumers' disposable incomes will come under greater pressure from increased VAT rates and public spending cuts," Marks & Spencer said.
"We are facing increased commodity prices and significantly tougher comparatives in the second half. As a result we remain cautious about the outlook for the remainder of this year and next."
Britain's biggest retailer Tesco earlier this week struck a more upbeat tone about the consumer outlook, describing a "slow and steady" British recovery, while grocer J Sainsbury said yesterday austerity measures were already embedded into shopping habits.
M&S serves 21 million British shoppers a week from over 650 stores and has about 300 shops abroad.
The retailer said sales at British shops open over a year rose 5.3 per cent in the 13 weeks to October 2nd - the fourth consecutive quarterly rise, up from 3.6 per cent in the first quarter and against analysts' average forecast of 3.2 per cent in a company poll.
Growth was driven by a 70-basis-point increase in market share in clothing.
Food market share also rose 10 basis points, while online sales surged 49 per cent.
Like-for-like British general merchandise sales, which include clothing and homewares, jumped 7 per cent, while food sales rose 3.7 per cent on the same basis.
Group sales were up 6.5 per cent, including a 6.2 per cent increase from international stores.
M&S has said new chief executive Marc Bolland, who joined in May from grocer Wm Morrison, will outline his thoughts on future strategy alongside interim results in November.
Its shares have lagged the STOXX 600 European retail index by 13 per cent this year and closed yesterday at 390.8 pence, valuing the firm at £6.2 billion.
Reuters