M&S annual profit falls as food margins are squeezed

M&S profits plunge 62pc amid sweeping store closure plans

M&S store closure costs result in 62% annual profit plunge

M&S announced on Tuesday that it was accelerating its reorganisation with the closure of 100 United Kingdom stores by 2022.

In November, two months after retail veteran Archie Norman joined as chairman, M&S detailed its latest attempt at a turnaround after over a decade of false dawns - a five-year programme of store closures and relocations to cut excess selling space in its clothing business and moves to make its misfiring food business more competitive.

The overall aim is to create fewer, better clothing and home stores, supported by a seamless online experience across all digital channels including mobile and social, and by a conveniently located network of food stores that offer customers a next-day collect in store service for clothing and home purchases.

Excluding the restructuring charge, the stores group's adjusted pre-tax profit was down 5.4% to £580.9mln from £613.8mln past year, weighed by a 140 basis points drop in the food gross margin as a result of a weaker pound pushing up input cost inflation.

M&S earmarked 14 stores for closure on Tuesday, including in London's Bayswater and Holloway Road, with a total of 872 employees affected. Comparable food sales were down 0.3 per cent. Revenue nudged up 0.7 per cent to £10.7 billion.

Profits before tax dropped from £176.4m to £66.8m during the year, and the cost of the store closure programme - which will see more than 100 stores close by 2022 - was reported to be £321m, which M&S said remains in line with its plan.

M&S profits plunge 62pc amid sweeping store closure plans

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

Free cash flow before adjusting items fell by 5.4% to £580.9mln from £613.8mln but net debt fell by 5.5% to £1.83bn from £1.93bn.

Rowe said it was targeting sustainable, profitable growth in three to five years time. "Accelerated change in the business is therefore our only option", Chief Executive Steve Rowe told reporters.

The company was particularly slow to get its online operations into gear and has admitted its website remains "slow".

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

When all is said and done, the Marks & Spencer closures will affect more than 1,500.

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