M&S full year profits down 64 per cent as restructure “impacted profits”

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Marks & Spencer

Marks & Spencer’s turnaround has hit a brick wall as its full year results show a drop in profits and its clothing arm continues to wane.

In the 52 weeks to April 1 pre-tax profits dived 63.9 per cent to £176.4 million, while revenues inched up 0.6 per cent to £10.6 billion.

Its clothing and home arm’s like-for-likes dropped 5.9 per cent in the last quarter, offsetting the promising 2.3 per cent boost in the quarter before. Across the whole year like-for-like sales fell 3.4 per cent and revenues dropped 2.8 per cent.

Meanwhile its grocery offering saw a 4.2 per cent growth in sales on a total basis, but like-for-likes dipped 0.8 per cent as the fourth quarter drop offset more promising months.

The poor fourth quarter performance was attributed to the timing of the December sale in its third quarter, and the late Easter coming outside the reporting period.

The new boss Steve Rowe has endured adverse trading conditions in his first full year leading the retailer. Despite withering sales figures, M&S says it has made progress in following Rowe’s strategy.

READ MORE: M&S clothing revival predicted to be short lived

In an effort to reshape its clothing line former Halfords boss Jill MacDonald was drafted in to lead the arm, while a “more consistent colour palette” and 10 per cent fewer lines is said to have positively impacted gross margins.

“We achieved a huge amount in the year and whilst there is still much to do, I am pleased with our progress and we remain on track,” Rowe said.

“As we have made improvements to our clothing and home product and proposition, our customers have noticed; we are starting to stabilise market share and importantly have seen full price market share growth, as we removed excessive discounting.

“As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits, but the business is still strongly cash generative and we reduced our net debt.

“Looking ahead, we will continue our programme of self-help in a tough trading environment. We remain committed to delivering for our customers and shareholders as we build sustainable foundations for the future.”

The retailer has predicted a growth of seven per cent in its food arm as it prepares to open 90 Simply Food stores over the next year.

Alongside this the retailer has warned of cost increases of around 3.5 per cent.

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1 COMMENT

  1. The drop in pre-tax profit announced by M&S shows that while boss Steve Rowe clearly remains resolute in his belief that positive steps are being taken to build a platform for improved future retail performance, doubts still exist as to whether this is a retailer that is ultimately too big and complex a beast to unravel and rebuild.

    Despite recent high-profile appointments in Archie Norman and Jill McDonald, and a commitment to closing underperforming stores, investing in food, focusing on bigger store footprints and an improved shopper experience, a 64% drop in full year profits reinforces the fact that achieving transformation instore is easier said than done.

    M&S is clearly a behemoth of a retailer. It is also is a prime example of how seemingly never-ending internal restructuring, a lack of responsiveness to identify and embed changes required, and an apparent lack of autonomy internally to act decisively and take the important decisions that have the ability to positively effect change, can negatively impact a retailer’s ability to deliver transformation at the speed with which modern retail now demands. Shoppers, the M&S Board, and institutional investors will surely be hoping that real and visible signs of the promised changes will begin to appear instore, and soon.

    Karl McKeever, managing director and founder of Visual Thinking.

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