EXTRA: M&S Annual Profit Falls As Costs Of Transformation Plan Hit

May 23, 2018, 17:14
EXTRA: M&S Annual Profit Falls As Costs Of Transformation Plan Hit

Excluding the restructuring charge, the stores group's adjusted pre-tax profit was down 5.4% to £580.9mln from £613.8mln previous year, weighed by a 140 basis points drop in the food gross margin as a result of a weaker pound pushing up input cost inflation.

That compared with profit after taxation of 117.1 million pounds a year earlier.

And its full-year results released today were sobering enough for the company to say in a statement it was "facing facts" and "accelerat [ing] change". "Accelerated change is the only option", said M&S.

As of the end of March, the retailer had 1,035 United Kingdom stores, made up of 300 clothing, home and food stores, 696 food-only stores and 39 outlets. In addition, M&S reported strong cash generation, even after restructuring costs reduced net debt by 107.2 million pounds, enabling the group to maintain a full year dividend of 18.7p.

Clothing and home revenue fell 1.4% and like-for-like sales decreased 1.9% amid a tough retail market. M&S attributed this decline to the planned removal of two clearance sales and unseasonal trading conditions during the second half of the year.

Rowe said the first phase of M&S's transformation plan - "restoring the basics" - is now well underway, with the actions taken thus far having boosted the "velocity of change".

It is taking an axe to its store estate in the face of continued migration of clothing and home online, the development of global competition, the growth of home delivery in food and the march of the discounters.

The moves are part of a transformation plan created to modernise the business as it looks to improve its systems and recover lost market share among younger shoppers.

"The new organisation will largely be in place by July and the team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business".

The company also warned that its website was "too slow", adding it was lagging behind online competitors. "In both businesses we need to revitalise our ranges and reassert our reputation for value for money". M&S has managed to reduce costs by at least 350 million pounds and created a platform for growth.