Marks & Spencer 's Irish operations have been hit hard by the VAT hike, with sales dropping in the first three months of the year
May 11 2012
The VAT hike has negatively affected sales in M&S
Marks & Spencer CEO Marc Bolland has told investors that the recent VAT hike hit sales in its Irish operations "hard".
The Irish Independent reports Bolland said “Ireland went back in the quarter."
Overall group sales for the British retailer also missed analysts’ forecasts moreover, with like-for-like sales dropping 0.7% in the three months to March, despite the market expecting a 0.2% increase.
Supply issues reportedly hampered M&S ability to meet demand within its clothing department.
Meanwhile in the Republic of Ireland where M&S has 21 stores, finance chief Alan Stewart said the VAT rise caused consumer sentiment to “take a turn for the worse”.
“Prior to that, Ireland had shown probably three or four months of certainly flat if not a mild recovery,” he said.
Yet he added that based on the group’s previous experiences, VAT impacts usually remain for “two or three quarters” but then become “part of usual business”.
The group’s executives made these comments just one week after generously announcing that over 3,000 Marks & Spencer staff would receive a pay rise worth €700 a year each, despite recording lower sales.
A 2.5% wage increase for the entire workforce worth €2 million was announced by the chain last month, after Mandate put in a claim in 2011.
Mandate said the pay rise, the first it has won for staff in the retail sector since 2009, should be awarded to employees for co-operating with the introduction of new technology and to help them cope with the rising cost of living.
It added that it hoped this would “set a precedent for the sector."
M&S has also impressed Irish customers by launching a localized Irish website, where over 10,000 homeware and clothing items are available for home delivery, although groceries are not. This forms part of a strategy to “become a leading international, multi-channel retailer.”