Dan AtkinsonShares in Marks & Spencer, one of the great names in the world of retailing, today shrugged off a 62.1 per cent full-year profits crash, reflecting the costs of a sweeping programme of store closures.
The stock climbed 11.3p, or 3,89 per cent, in early trading in London to reach 303.15p, perhaps partly as in relief that the total dividend pay-out for the year, at 18.7p, was unchanged on the previous year.
Steve Rowe, M&S chief executive, said the first phase of the company’s transformation plan “is now well under way” and the management had “increased the velocity of change running through our business”.
But, he added, these changes come with short-term costs that are reflected in today’s results.” The store-closure programme put a £321.1 million dent in the figures, which cover the year to March 31.
Pre-tax profit plunged from £176.4 million in the year to March 2017 to £66.8 million.
On-line offering lags competitors
On some measures, M&S has been drifting since the late Nineties, when a sudden sales collapse ended a golden period during which its formula of good quality clothes, food and homewares seemed to have been successfully exported to France and Germany.
Since then, as M&S put it today, headwinds have included “the continued migration of clothing and home [wares] on-line, the development of global competition, the growth of home delivery in food and the march of the discounters”, adding: “These, together with a challenging UK consumer market, mean that we have to modernise our business to ensure we are competitive and re-ignite our culture.
Central to this change is a programme of store closures that will see 100 shops disappear by 2022. About 25 per cent of retail space devoted to clothing and homewares will go.
Meanwhile, M&S is to revamp its digital presence. “Although our on-line sales are growing, our on-line capability is behind the bets of our competitors and our website is too slow.”
The company’s distribution centre at Castle Donnington in the English Midlands “has struggled to cope with peak demand and some of our systems are dated”.
Refreshing family appeal
Part of the transformation plan is about “making M&S special again”. The management wants an overhaul of the company’s culture which, it said, “was inward looking and too ‘corporate’”.
Instead of a single business, M&S is moving towards “a family of accountable businesses each led by its own integrated management team”. Already, the food and the clothing & home businesses have been re-organised in this way, and the company’s property assets are to be run by an “active property management team”.
The company admitted that “our customer base has narrowed and we have lost share of younger family-age customers and larger households”, while retaining shares in other categories. M&S wants to rebuild its appeal to family-age customers in the clothing & home division, by reducing the number of lines, “buying more stylish product in greater depth, and emphasising value”.
Similarly, in food, M&S is to focus “on more popular family product”, adding: “This will better exploit our unique credentials for freshness, taste and traceability”.
The company told shareholders: “Our focus remains to be an own-brand retailer with quality, innovation, traceability and trusted value at our core.”