Primark set to overtake Marks and Spencer market share
June 23 2018, 04:39 | Irvin Gilbert
M&S profits plunge 62pc amid sweeping store closure plans
Marks and Spencer (M&S) has revealed steep falls in annual sales and profits, hours after accelerating its store closure programme.
The high street chain's pre-tax profits have plunged 62.1 per cent to £66.8 million after £514.1 million of exceptional charges, including £321.1 million linked to its store closure programme.
The full-year results are slightly better than the City had feared but continue the longterm decline in profits that M&S has experienced from a decade ago, when it reported profits of £1 billion. "Accelerated change is the only option", it said.
Excluding the restructuring charge, the stores group's adjusted pre-tax profit was down 5.4% to £580.9mln from £613.8mln a year ago, weighed by a 140 basis points drop in the food gross margin as a result of a weaker pound pushing up input cost inflation.
"We have been clear about our plans to accelerate our store closure program and the action we must take to build a business with sustainable, profitable growth", an M&S spokesperson said.
Its full year results for the year ended March 31st, 2018, group revenue was up marginally to £10.7 billion, but profit after tax fell 74.8 per cent to £29.1 million from £115.7million.
M&S lost more ground in the 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 0.4 percent fall. But the hard truth is that M&S has more stores than it needs, given our changing shopping habits.
"M&S is now teetering on the edge of relegation from the FTSE 100 in the quarterly reshuffle next week", said Laith Khalaf, senior analyst at Hargreaves Lansdown. "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.
Looking to the year ahead, M&S said it expects Clothing & Home gross margin to be flat to up to 50 basis points higher, "with the first half of the year adversely affected by currency and sale timing".
M&S is also improving its website and investing in its e-commerce capacity, including a site at Castle Donington, with the aim of doubling its online share of clothing and home sales to more than 33%.
"We do not think the downgrade cycle may yet be over", said analysts at Liberum, maintaining their "sell" rating.