Marks & Spencer's Christmas spoiled by online delivery woes

LONDON, United Kingdom - Marks & Spencer missed Christmas sales forecasts, hit by delivery problems at its online business and raising fresh questions about chief executive Marc Bolland's turnaround strategy for Britain's biggest clothing retailer.

The 131-year-old mainstay of Britain's shopping streets said on Wednesday same-store sales of general merchandise, which includes clothing, gifts and homewares, plunged 5.8 percent in the 13 weeks to Dec. 27.

That was the fourteenth consecutive quarterly decline; below the 3 percent drop expected by analysts and also signalled a weaker performance than arch-rivals Next and John Lewis.

"Once Britain's greatest retailer, M&S is fast becoming an also-ran," said John Ibbotson, director of retail consultants Retail Vision.

"The quality, price and website of its clothing arm are simply not good enough compared to the ever buoyant Next. M&S is still also confused about its target market -- young or old?"

At 0850 GMT, M&S shares were down 3.4 percent at 447.4 pence, the biggest drop on the UK's benchmark FTSE-100 index and wiping out some of the 10 percent gain over the last 13 weeks.

"We had a difficult quarter in general merchandise, dominated by unseasonal conditions and an unsatisfactory performance in our e-commerce distribution centre," Bolland said in a statement.

M&S said in December its new online distribution centre was struggling to cope with demand in the run-up to Christmas, resulting in no next day deliveries and longer waits for customers.

M&S.com sales fell 5.9 percent in the quarter.

Bolland was poached from grocer Morrisons in 2010 to turnaround M&S's general merchandise business. But while a new clothing team has won positive reviews in the fashion press, it has yet to deliver a sustainable improvement.

In its food business, which contributes over half of group sales, M&S said a 0.1 percent rise in like-for-like sales outperformed the wider grocery market. But it was still lower than the 0.9 percent increase analysts had expected.

"Like Tesco, it (M&S) needs radical change, but have the management team got the courage to implement it?" Ibbotson asked, referring to the far-reaching turnaround plan announced by Britain's biggest retailer on Thursday.

Bolland is trying to wean M&S off heavy discounting in its general merchandise business and said this had allowed it to keep gross profit margin guidance for the full financial year.

Analysts said this, as well as a reduction in the expected increase in annual operating costs, would probably keep full-year profit forecasts unchanged around 640-650 million pounds.