M&S vows to continue with review of store estate as sales remain squeezed

● But latest figures offer some comfort with news of a modest rise in earnings

Marks & Spencer has warned of a challenging outlook for sales growth as it reported a decline in half-year revenue, but surprised the market with a higher profit figure.

Revenue dropped by 3.1 per cent to £4.96 billion, reflecting declining sales in both the food and clothing and home divisions.

M&S said it does not expect much improvement in sales in the near future, as it deals with “the growth of online competition and the march of the discounters”.

“Therefore, as we embark on the difficult early stages of transformation, we are expecting little improvement in sales trajectory,” the high street stalwart said.

The retailer has already announced plans to close about 100 stores in the UK as well as exiting some interna- tional markets, but said “significant further change” is required.

Clothing and home revenue fell by 2.7 per cent as a result of the strategy to close underperforming stores and reduce the amount of in-store space dedicated to non-food items. Like-for-like sales declined by 1.1 per cent.

Food revenue dipped by just 0.2 per cent overall, but likefor-like sales slipped by 2.9 per cent due to the use of fewer promotions and the timing of Easter.

Underlying pre-tax profits rose 2 per cent to £223.5 million, compared with £219.1m a year earlier. Consensus forecasts had pointed to a decline in profits to £203m.

M&S said the improved profit was due to the phasing of costs, but full-year cost guidance remains the same.

Chief executive Steve Rowe said on a call with media that M&S needs to have a “constant churn” of locations to ensure its store portfolio is fit for purpose.

“We should have been doing what retailers do all the time. We need a constant churn to ensure we’ve got the right stores in the right places for our customers.”

He added: “We are on track to restructure our store portfolio with over 100 full-line closures and expect to see newly remodelled stores open next year.”

John Moore, senior investment manager at Brewin Dolphin, said: “Underneath the headline sales figures there was an encouraging financial performance, with free cashflow up and debt levels down – this will provide headroom for the business to invest in muchneeded changes to its offering, format, and delivery.”

● John Lewis Partnership has announced that chairman Sir Charlie Mayfield is to step down in 2020. It has begun the search for a successor.