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M&S profit plummets 10%


High street retailer Marks and Spencer (M&S) has seen profit before tax fall by nearly 10 per cent in its first half, figures released today reveal.

In the 26 weeks ended September 29th 2012, UK total sales grew 0.6 per cent thanks in part to renewed confidence on the high street though like-for-like (LFL) sales decreased 1.4 per cent.

Group sales were up 0.9 per cent to £4.7 billion over the period, buoyed by a strong performance in food, which saw total sales jump 3.4 per cent in the half despite the difficulties facing the food sector thanks to its dining promotions and offers.

Retail analyst Neil Saunders, Managing Director of Conlumino, explained that additional factors may have improved food sales, commenting: “While M&S has benefited from austerity-driven trends such as dining in at home rather than dining out, the key factor underpinning its performance is a focus on innovation and quality.

“Nowhere is this more obvious that on M&S’s ability to react to national occasions, such as the Jubilee, by launching treat-based products which are relevant and compelling.

“M&S has also upped its game in terms of food counters within some stores.These cater for the increased consumer demand for fresh, takeaway products and, in some locations, help it compete against food-service providers in the battle for lunchtime trade.

“In many ways, food is the business that the clothing side of M&S needs to imitate. It has an excellent grasp of its customer base, continually reinvents itself to remain interesting, and manages to outpace much of the competition in a very fast paced and high pressured retail sector.”

Clothing sales remained weak over the half despite improved trading and the retailer’s merchandising falls short of competitors’ offerings, though general merchandise saw a 0.1 per cent uplift in the second quarter, down 2.5 per cent in H1.

In a bid to further improve its fortunes in the sector, M&S yesterday announced two new appointments to its General Merchandise management team, further to an overhaul of its GM team in July following the departure of Kate Bostock.

Janie Schaffer joins the team from lingerie specialist Victoria’s Secret where she was Chief Creative Officer responsible for all clothing, lingerie and beauty products and will now operate as Director of Lingerie & Beauty starting early next year.

Frances Russell, who has previously held the position, has been promoted with immediate effect to Director of Womenswear as the team seeks to focus on improving its product offering.

Marc Bolland, M&S CEO, said: “We are pleased to report a better performance across the business in the second quarter.

“We took steps to address the short term merchandising issues in General Merchandise and as a result, we delivered an improved performance.”

Another key focus for the company in recent months has been improving its multichannel offering and last week it announced the launch of four European websites as it extends its digital reach.

Online sales jumped 17.8 per cent in the first half and 21.6 per cent in Q2 while its international sales increased 3.6 per cent and 6.1 per cent respectively.

Bolland concluded: “Eighteen months in, we are making strong progress with our plan to transform M&S into an International Multi-channel retailer.

“Our new International stores are performing well, and our Multi-channel business is delivering strong growth.

“As we approach the all important Christmas period, we have better than ever Christmas products, to help our customers enjoy a special Christmas at home.”

Clearly, the results are mixed and Saunders concluded that, though half year numbers appear anaemic, the second quarter has seen a considerable improvement on the first.

He added: “That said, it remains too early to call whether M&S is back on the path to sustainable growth.

“Indeed, even with a better Q2 performance, M&S has still underperformed the market in fashion and growth in general merchandise remains elusive on a like-for-like basis.

“All of this points to the fact that M&S still has plenty of issues to resolve and there is still much work to be done. In essence, the company has moved into gear but has yet to put its foot on the accelerator.”

Published on Tuesday 06 November by Editorial Assistant

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