Marks & Spencer's profits rise for first time in four years
In the year to 28 March, underlying profit before tax rose by 6.1% to £661.2 million while group sales edged up 0.4% to £10.3 billion. Statutory pre-tax profit increased by 3.4% to £600 million.
Marks & Spencer said its food business’s specialist positioning had differentiated it from the competition with total sales rising by 3.4% and like-for-like sales edging up 0.6%. This meant it has now delivered 22 consecutive quarters of like-for-like growth. During the year, the food business introduced 1,700 new products, equivalent to almost a quarter of the entire range, and opened 62 new Simply Food stores which are performing ahead of expectations.
General merchandise sales, which includes clothing, dropped by 2.5% on a total basis and by 3.1% on a like-for-like basis. Marks & Spencer said sales for the year were “disappointing” although they had returned to growth in the final quarter. The company said it had been disproportionately affected by one of the warmest autumns on record due to its high market shares in winter categories such as knitwear and coats.
Marc Bolland, Marks & Spencer chief executive, said: “We made good progress in three of our four key priorities for the year. In food, we had an outstanding year in a difficult market. In GM, we significantly increased the gross margin, and, while sales performance was below our expectations, we returned to growth in the fourth quarter. We continued to control costs and capital expenditure tightly, resulting in significantly improved free cash flow.”
International sales fell by 2.1% on a constant currency basis as trade was impacted by political turbulence in a number of the company’s franchise territories, particularly in Russia, the Ukraine and Turkey. In addition, the macro-economic situation in the Middle East region impacted consumer demand leading to some de-stocking by Marks & Spencer’s partners.
Online sales were down 2% over the year following the launch of the company’s new website which Marks & Spencer said presented a “bigger change” for customers than anticipated. However, sales returned to growth in the fourth quarter with a gradual improvement across traffic levels, customer satisfaction and conversion rates.
Bolland added: “We are transforming M&S into a stronger, more agile business - putting the right infrastructure, capabilities and talent in place to drive our strategic priorities.”
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