Tuesday, February 25, 2020

M&S profits slide despite sales rise


High street retailer Marks and Spencer (M&S) has today reported a 3.2 per cent fall in pre-tax profit to £665.2 million in its full year despite a rise in sales, figures released today reveal.

Group sales reached £10 billion in the 52 weeks ended March 30th 2013, up 1.3 per cent on a year earlier while sales in the UK saw a slight boost.

Total UK sales climbed 0.9 per cent over the period while like-for-like (LFL) sales declined by one per cent as poor trade across General Merchandise (GM) impacted results.

Although M&S‘ food offering proved popular with Food sales up 3.9 per cent and rising 1.7 per cent LFL, its GM sales continued to struggle amid an ongoing turnaround plan.

Total GM sales dropped 2.4 per cent over the year while LFLs decreased by 4.1 per cent and M&S CEO Marc Bolland said that the retailer is “working hard” to improve trade in the category.

“We are working hard to get the General Merchandise performance back on track,” Bolland said.

“We have already made progress in our operational execution, and our new Autumn/Winter ranges have received a positive reaction.

“We are very pleased with Food performance which benefitted from our continued focus on delivering innovation, and unrivalled quality and provenance.

“Our International operations performed well in key markets and our multichannel business delivered strong growth.”

International sales jumped 4.5 per cent compared with a year earlier after the retailer witnessed strong LFL growth across key markets and expanded both its physical and digital portfolios.

M&S opened 45 new international stores including eight new territories while its franchise operations also grew as the retailer opened 19 such new stores across 11 territories.

In Asia, the franchise business traded well with key Indian and Chinese markets reporting double-digit LFL growth during the full year while the Middle Eastern arm of the business “delivered a good performance”.

In the UK, M&S began the roll-out of its new store format with 337 stores now completed, representing more than 65 per cent of its retail space while the second phase of its store transformation got underway.

In the digital sphere, multichannel sales accelerated over the period, up 16.6 per cent despite tough comparatives.

M&S‘ UK website now has over 3.6 million weekly visitors thanks to improved functionality, the retailer said, and the online business accounts for 13 per cent of GM sales.

Neil Saunders, Managing Director of analyst firm Conlumino, said of the figures: “Marks & Spencer is now two years into its three year transformation programme which aims to make it a truly international, multichannel retailer.

“On the multichannel front, M&S‘s performance is reasonable but not spectacular.

“Given that M&S is not as developed in multichannel as other retail players optimal growth should ideally be some way north of the reported 16.6 per cent.

“Improvements in fulfilment, including the investment fulfilment at Castle Donnington, will certainly go a long way to increasing logistical flexibility.

“However, M&S also needs to review its online ranging, presentation and marketing to ensure that it becomes a true destination across all the non-food categories it offers.

“While international and multichannel do deliver growth, their profitability is, of necessity, somewhat weaker than traditional operations.

“As such, alongside the growth of these elements M&S also needs to focus firmly on its UK business.

“On this ‘home front‘ advancement is a little less encouraging and, in clothing at least, has seemed more like a gentle evolution than a radical reinvention.”

M&S‘ clothing category has undergone a period of consider