Marks & Spencer sees lowest profits in four years
Marks & Spencer’s annual profits fell to their lowest level in four years today, as food sales were offset by a slump in clothing sales.
Underlying pre-tax profits for the year were £665.2 million, a fall of 6% on a year earlier and well below City forecasts for £710 million at the beginning of the financial year, since when expectations have been revised.
It is also a far-cry from the retailer’s heyday in 2008 when it made more than £1 billion.
The results mean chief executive Marc Bolland remains under pressure to turn around the high street stalwart, particularly in the wake of an executive reshuffle and the launch of a new “turnaround” clothing range last week.
Like-for-like UK sales fell by 1% with general merchandise down 4.1% though food did better, improving by 1.7%. Overall group sales were up 1.3%, buoyed by international takings.
Mr Bolland, who took charge of the retailer in 2010, recently reshuffled his team amid an alarming slide in clothing.
Sales from the division were down 2.4% in the year but had been as much as 5% lower at the start of the period until the company took “decisive action”.
The company said the new fashion team, led by John Dixon, the head of general merchandise brought over from M&S Food, and style director Belinda Earl, the former Debenhams and Jaeger boss, was “reinvigorating” its ranges.
Today it announced yet another change at the top, as Steven Sharp, executive director of marketing, has retired after nine years to be replaced by Patrick Bousquet-Chavanne, formerly of Estee Lauder.
M&S said: “The improvement in product will take time to come through, but our customers will start to see the benefits of the changes from this summer.”
Last week’s launch of the retailer’s new fashion range, available in stores from this summer, is being seen as the litmus test of the new regime and a key moment in Mr Bolland’s attempts to turn around the fortunes of M&S.
Announcing today’s results, Mr Bolland said M&S had made “strong progress” in some areas while chairman Robert Swannell said the retailer was “building longer term foundations”.
M&S also said its sales had been affected by the squeeze on household conditions as well as unseasonable weather. But revenues were up from £8.87 billion to £8.95 billion.
Shares were up nearly 2% on the results, as the profits fall had been widely expected by markets.
Mr Bolland told BBC Radio 4’s Today programme: “It’s been not good enough but still we have got the largest business in the UK by far.”
He said quality “has certainly been good and better than competitors”, but the retailer was now aiming “to bring something that really delights and surprises the customer so we can do better than we have done before”.
“Secondly, it’s about style. We can bring improved style, more trends to customers than we have done so far and where we have done that in our womenswear it has really helped.”
Shop rates “should be frozen”
Business rates should be frozen for two years to give threatened high streets “breathing space” to deal with the rise of internet shopping, think-tank Policy Exchange has said. However, it added that if traditional retailers failed to take the chance to reinvent themselves some shopping centres might have to be allowed to die.
Figures released yesterday showed shop vacancies have surged to a new high of 11.9% as high-profile retail failures knock holes in shopping centres.
High streets have been “vastly outperforming” shopping centres and out-of-town retail parks, boosted by a 5% increase in evening drinkers, diners and clubbers.
The think-tank said a four-fold increase in online purchases since 2006 was the main factor behind the growing number of boarded-up shops.
Head of housing and planning Alex Morton said: “We believe that there is a case for a two-year freeze on business rates.
“But this only makes sense in the context of giving breathing space for further changes to retail policy to bring it into the 21st century.
“Policy needs to give high streets the best chance to reinvent or renew themselves but it should primarily focus on removing barriers to consumer choice that push up the cost of living, and must not assume all high streets can or should remain as shopping centres.”