We must face facts, says M&S, as profits drop 62%

Revenue rose 0.7% to GBP10.70 billion for the year to March 31, up from GBP10.62 billion last year, but pretax profit dropped 62% to GBP66.8 million from GBP176.4 million.

M&S earmarked 14 stores for closure on Tuesday, including in London's Bayswater and Holloway Road, with a total of 872 employees affected.

The supermarket chain reported a 5.4pc fall in full-year profit, a second straight decline, hurt by a weakening in the food profit margin.

At the end of 2017/18 M&S had 1,035 stores in the United Kingdom, with 300 Clothing, Home and Food, 696 Food-only and 39 Outlet stores. Heavy snowfall in March from the so-called "Beast from the East" also had an impact on sales as consumers remained indoors in March. "Accelerated change is the only option", M&S said in a statement.

"The first phase of our transformation plan, restoring the basics, is now well under way and the actions taken have increased the velocity of change running through our business".

The group plans to move about a third of its sales online and reduce the floor space devoted to its struggling clothing and home division. It is now worth less than both online grocer Ocado (OCDO.L) and online fashion website ASOS (ASOS.L), starkly illustrating how shopping habits have changed in only a decade. Under the plan, M&S has the ambition to create fewer, better Clothing & Home stores. Operationally, M&S said it will reposition the Food business in the year ahead to become more "relevant".


"There are a number of structural issues to address and we are taking steps towards fixing these", Mr Rowe added.

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

"This is vital as we start to leverage the strength of the M&S brand and values across a family of businesses to deliver sustainable, profitable growth in three to five years".

M&S left its dividend unchanged at 18.7p. Free cashflow before adjusting items was down 12.6 per cent to £582.4 million from £666.3 million.

"In the a year ago traditional retailers like Marks have faced a flawless storm of rising costs, a constrained consumer, and the relentless growth of online competition", said Hargreaves Lansdown analyst Laith Khalaf.

"We do not think the downgrade cycle may yet be over", said analysts at Liberum, maintaining their "sell" rating.


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