As expected, Marks & Spencer has posted a fall in annual sales and profits as it continues to implement a major turnaround programme. Management pointed to “green shoots” in some parts of its business as it worked to close underperforming stores, cut costs, and overhaul its product offering.
In the year to 30 March, the group’s underlying pre-tax profits fell 9.9% to £523.2m, with turnover slipping 3% to £10.4bn.
Revenue in its UK food division declined 0.6%, with like-for-likes slipping 2.3% – partly due to Easter this year falling after the end of the financial period. Adjusted for the Easter timing, like-for-like sales were down 1.5% with M&S pointing to an improving trend in the second half of the year and like-for-like revenue and volume growth in its fourth quarter.
The group has been overhauling its food offering and working to improve its competitiveness amid plans to roll it out to more stores and grow its reach via a delivery joint venture with Ocado. M&S said today that its food business was showing good signs of progress with moves aimed at “restoring trust in our value” having relatively little impact on margins.
It stated that it has nearly halved its dependence on the short-term promotions and multi-buy offers, without a significant loss of customers. This has enabled it to invest in price reductions on over 400 lines, which it claims has narrowed its price differential with key rivals to the lowest it has been for some years.
Meanwhile, M&S’s UK Clothing & Home division saw revenue decline 3.6%, partly due to its store closure programme. Like-for-like revenue was down 1.6%, dented by a weaker fourth quarter due to the timing of Easter and stock supply issues.
In May last year, M&S announced it would close more than 100 older and poorly located clothing and home stores by 2022 as opens more modern shops and shifts trade online.
During its last financial year, the group closed 35 full-line stores as part of the shake-up, whilst opening 48 food outlets. The group said today that this programme was being expanded with it now expected to close another 85 full-line stores in addition to those it has already shut, taking the total to 120 by 2024. It also now plans to close 25 smaller, low-volume, high-cost food stores and open 75 new and bigger food outlets.
M&S said it had made “good progress” on cost savings during the last financial year, which were about £100m, in addition to the operating costs of stores which had closed.
CEO Steve Rowe said: “We are deep into the first phase of our transformation programme and continue to make good progress restoring the basics and fixing many of the legacy issues we face.
“As I have said, at this stage, we are judging ourselves as much by the pace of change as by the trading outcomes and change will accelerate in the year ahead.”
He stressed that there had been “green shoots”, but also admitted the retailer had “not been consistent in our delivery” in a number of areas.
“M&S is changing faster than at any time in my career – substantial changes across the business to our processes, ranges and operations – and this has constrained this year’s performance, particularly in clothing and home. However, we remain on track with our transformation and are now well on the road to making M&S special again.”
Commenting on the results, Richard Lim, Chief Executive at Retail Economics said: “The business continues to struggle against the rapidly changing consumer environment and the race is on to pivot the business towards a more sustainable proposition that puts digital and experiences at its heart.
“The proposition remains lost amongst an increasingly competitive and dynamic market. The transformation needs to occur at a rapid pace, involving a reduction in the number of stores, repurposing space, reducing headcount and trying to leverage partnerships effectively if it is to survive this unprecedented era of disruption.”
NAM Implications:
- It all comes out on the bottom line, eventually…
- It still looks as if a split of clothing and food business models might be a good way to help the business and the City deliver and recognise real improvement…
- Therefore, worth NAMs treating M&S as two entirely separate businesses.
