Published: Wed, May 23, 2018
Worldwide | By Jermaine Blake

Profits dive 62pc at M&S

Profits dive 62pc at M&S

In addition to the accelerated store overhaul, M&S is improving its website and investing to increase its e-commerce capacity.

Marks & Spencer has unveiled another year of falling profits as the high street giant counts the cost of its transformation programme.

Profits after tax fell 74.8 per cent from £115.7 million to £29.1 million year-on-year. Food gross margin is expected to decrease by as much as 50 basis points.

M&S paid around GBP514.1m in charges previous year, including GBP321.1m on its United Kingdom store estate closure programme. The plan was announced 18 months ago, to close down number of stores dedicated to M&S's clothing range.

"Closing stores isn't easy but it is vital for the future of M&S", said retail director Sacha Berendji.

Under the plan M&S has the ambition to create fewer, better clothing and home stores, which will be larger, digitally enabled, better located and more inspirational for customers to shop.

Operating costs in distribution and warehousing were up 3.5 per cent at £538m, "largely driven by by inflation, volume and the cost of channel shift".

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The M&S chief executive, Steve Rowe, said major structural changes were having an impact on the 134-year-old retailer as sales transferred to the internet and no-frills chains such as Primark, Aldi and Lidl. "These changes come with short term costs which are reflected in todays results".

"And we're concentrating on tackling the culture of the business, making M&S a faster, lower cost and more commercial digital business".

Rowe said it was targeting sustainable, profitable growth in three to five years time.

While the retailer said it has made a "rapid" start with the enabling steps to deliver its ambition of reducing costs by at least GBP350m, its supply chains in both clothing and home and in food require "significant upgrades", to boost speed to market and reduce high stock levels in clothing.

Rowe said the food business had underperformed during the quarter as gaps on shelves were compounded by stiff price competition.

"M&S will now close over 100 stores in total by 2022, including 21 that have already closed and the 14 stores that are announced today as proposed for closure or set to close", the company said. The company further updated investors on its ongoing shake-up, noting that the first phase of its transformation programme was "well underway".

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