MAKSY Marks and Spencer Group (QX)

LONDON—British retailer Marks & Spencer Group PLC reported a 1.9% rise in sales for the fiscal fourth quarter as food sales helped outweigh a continuing slump in its clothing and home division.

The sales update is a first under new Chief Executive Steve Rowe, who took the reins on Saturday, and is facing the uphill task of turning around M&S's clothing and home sales, which have struggled for a string of quarters, while continuing to grow its food arm.

M&S warned that it continues to expect currency pressures and challenging trading conditions to heavily impact its full year profitability.

On Thursday M&S reported a 4% rise in food sales for the 13 weeks ended March 26, although sales were flat on a comparable basis as the company said it chose to improve its margins in this business. Sales fell 1.9% in the clothing and home business while comparable sales were down by 2.7%.

"Turning around our clothing and home business by improving our customer offer is our number one priority," said Mr. Rowe, an M&S lifer who started out doing small jobs for the company in 1983 at the age of 15.

The results underscore the pressure on Mr. Rowe to set out a clear strategy at M&S's full-year earnings update next month on how he plans to revive non-food sales.

"The outcome of his plans will ultimately determine the success or otherwise of M&S' share price performance for the immediate future," said Shore Capital analyst Clive Black of Mr. Rowe.

Mr. Rowe, who will continue to head up M&S's clothing and home arm, has in the months before becoming CEO moved to improve range, pricing and availability in the division while making senior management changes. On Thursday he acknowledged the moves hadn't gone far enough saying that "although the sales decline in clothing and home was lower than last quarter, our performance remains unsatisfactory and there is still more we need to do."

He said M&S has ratcheted down promotional activity, instead cutting prices in a more sustainable fashion. The price of black women's jeggings—leggings that resemble jeans—for instance, has dropped from £ 19.50 ($27.46) to £ 17.50, which more than doubled units sold from a year earlier, while white men's T-shirts fell from £ 7.50 to £ 6, leading to a unit sales rise of 46%.

The London-based retailer said it now expects the full year clothing and home gross margin to be between 240 to 250 basis points, narrowing its previous guidance for the top end of 200 to 250 basis points.

Peel Hunt analyst Jonathan Pritchard said he is looking to Mr. Rowe "to hopefully usher in a new strategy" during the company's full-year earnings report next month, describing the M&S results between 2010 and 2015 as "profoundly disappointing."

Analysts have suggested Mr. Rowe should look to sell underperforming stores, improve staff engagement, clean up its clothing and home brands and improve product quality in the division.

"Short-term pain is required if M&S is to return to past earnings levels in a sustainable manner," said Mr. Pritchard.

International sales on a constant currency basis grew by 3.8% in the period, while in the U.K. sales grew by 1.6% and like-for-like sales fell by 1.1%.

Olga Cotaga contributed to this article.

Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com

(END) Dow Jones Newswires

April 07, 2016 04:45 ET (08:45 GMT)

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