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Marks & Spencer profits fall alongside store closure programme

Source: Mintel 22-05-2019

Marks and Spencer has reported a third year of consecutive profit falls in their latest accounts, with profit before tax down 9.9% to £532.2 million in the year to 31st March.

This was accompanied by a fall in revenue, which dropped 3.3% to £10.3 billion. This was underpinned by 3.6% decline in clothing and home revenue, and a 2.3% fall in like-for-like turnover.

The results arrive amid ongoing restructuring efforts, and plans to close a further 85 full-line stores and 25 Simply Food stores this year. However, the group maintains that its transformation plan remains on track, with the pace of change due to accelerate in its new financial year. The target remains sustainable, profitable growth in three to five years.

“The ongoing declines in both sales and profits at M&S are undoubtedly disappointing as the retailer’s ongoing transformation is yet to yield positive results. However, this is a tale of two stories. After a poor first half and mixed Christmas it is encouraging that on the food side the investment into value was rewarded by a stronger Q4 performance and this combined with a reduction in promotional activity is re-establishing a solid EDLP-based value-for-money core for M&S to build on. There are still self-admitted issues around availability but it is also good to hear M&S talk about the need to broaden the types of shopper missions, although doing so will take time as it looks to secure more sites, with a notable detail that the business is actively seeking sites with ample parking that can cater to fuller-baskets. Meanwhile, the performance of the clothing and home business remains lacklustre, with continued like-for-like declines. Although M&S is making a number of well-considered moves to improve its clothing offer, including reducing the number of options within its range and balancing its size availability to mirror its customer base, the retailer has stated that implementing the necessary changes to its clothing offer has been challenging. One of the biggest issues that M&S needs to overcome is its outdated supply chain, and whilst a number of its competitors have made notable progress, significantly shortening product lead times and enabling them to be more responsive, there is still little indication that M&S is doing enough in this area. It is particularly concerning that popular lines have continued to sell-out prematurely, with the retailer still failing to meet the demand for its most popular products. Adding fuel to the fire is M&S’ store estate, and although the retailer is looking to create a rationalised, more contemporary store environment, many of its tired stores continue to erode perceptions of the brand, which is particularly damaging to the M&S clothing division.”

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