M&S profits slump on store closure costs

Marks and Spencer share price

M&S made a pretax profit before one-off items of 580.9 million pounds in the year to March 31, particularly hurt by a decrease in the food gross margin.

Excluding the charges, profits before tax slipped 5.4 per cent to £580.9 million on revenue that rose slightly to almost £10.7 billion in the year to March 31.

M&S reset its strategy in November, two months after retail veteran Archie Norman joined as chairman, detailing a five-year programme of store closures and relocations, and moves to make its misfiring food business more competitive.

Then in November past year, three months after retail veteran Archie Norman joined as chairman, the firm said it would speed-up the programme. Actions taken under the plan include the sale and franchise of the firm's retail business in Hong Kong and Macau.

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. After-tax profit meanwhile came in 74.8 percent lower at £29.1 million. This is said to be a result of M&S's successful exit of loss-making owned markets and favourable currency effects.


M&S lost more ground in its fourth quarter, with like-for-like clothing and home sales down 3.4 percent, worse than the previous quarter's 2.8 percent drop, and same store food sales down 0.6 percent, against a third quarter fall of 0.4 percent.

M&S is expected to announce a second consecutive year of declining profits when it releases its sales figures for the year later today.

"These, together with a challenging United Kingdom consumer market, mean that we have to modernise our business to ensure we are competitive and reignite our culture".

M&S store closures are always big news, especially for the towns where the shops have been reassuring fixtures on the high street for decades.

The company is seeking to reduce costs by at least £350 million, although its dividend will be maintained at its current level. The announcement is in line with the next tranche of United Kingdom stores proposed for closure or set to close as it reshapes its United Kingdom store estate in line with its target to take at least a third of sales online. "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", Rowe added.

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