M&S feels squeeze on margins despite food arm's bumper Christmas

Marks & Spencer has reduced its gross margin forecast despite achieving a strong increase in food sales over Christmas.

The retailer said it expected gross margins in 2011-12 to be lower than for the previous year, due largely to an increase in clothing promotions.

The food business did well, as demand for Christmas products helped boost like-for-like sales by 3% in the third quarter. Overall UK sales were up 0.5% on a like-for-like basis in the three months to 31 December.

“Our food business performed very strongly as customers enjoyed our new and traditional Christmas products,” said chief executive Marc Bolland.

But sales tumbled at its home business, down more than 13% for the quarter after M&S pulled out of the technology market.

Meanwhile, international sales jumped by 8%, helped by the continued development of the businesses in India and Shanghai. M&S said its flagship Paris store, opened in November, had seen a very good start to trading.