No let-up as bleak out­look goes on for M&S

Re­tailer ex­pects lit­tle im­prove­ment in sales

Yorkshire Post - Business - - BUSINESS / NEWS - Ros Snowdon CITY ED­I­TOR @RosSnow­donYPN

Marks & Spencer warned that “sig­nif­i­cant fur­ther change” is needed af­ter it is­sued a bleak out­look for sales fol­low­ing the growth in on­line com­pe­ti­tion and the march of the dis­coun­ters.

The high street bell­wether has al­ready an­nounced plans to close around 100 stores and said it does not ex­pect much im­prove­ment in sales in the near fu­ture.

Chief ex­ec­u­tive Steve Rowe said 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,” he said.

“We need a con­stant churn to en­sure we’ve got the right stores in the right places for our cus­tomers. I’m not go­ing to stop at 100 and say job done.”

M&S’s half year rev­enue fell 3.1 per cent to £4.96bn, re­flect­ing de­clin­ing sales in both the food and cloth­ing and home di­vi­sions.

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

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

Roy Kaitcer, in­vest­ment man­ager at Leeds-based in­vest­ment man­age­ment firm Red­mayne Bent­ley, said: “Trad­ing con­di­tions for M&S are still very tough. In­vestors will be hop­ing to see an im­proved per­for­mance in their cloth­ing range, which is up against com­pe­ti­tion from on­line re­tail­ers such as boohoo.com and Asos. M&S food sales have al­ways held up well in the past, but the mar­ket is now be­com­ing in­creas­ingly com­pet­i­tive for them.

“It will be in­ter­est­ing to see how M&S fares dur­ing the key Christ­mas pe­riod, which is likely to be a chal­leng­ing time for the store this year, as it is across the re­tail sec­tor.”

Un­der­ly­ing pre-tax prof­its rose 2 per cent to £223.5m, com­pared with £219.1m a year ear­lier.

Con­sen­sus fore­casts had pointed to a de­cline in prof­its to £203m.

Laith Kha­laf, se­nior an­a­lyst at Har­g­reaves Lans­down, said: “The most re­cent mis­sive from M&S makes for grim read­ing, de­spite the head­line rise in prof­its. How­ever, ex­pec­ta­tions are al­ready low, and while there are few signs of re­lief in its lat­est num­bers, the broad di­rec­tion of travel at M&S won’t come as a shock to any­one.

“Sales are fall­ing, in both food and cloth­ing & home di­vi­sions, and an early Easter has added in­sult to in­jury. Only a short time ago the food busi­ness looked to be the jewel in the crown of the M&S em­pire, though to­day it’s look­ing pretty jaded.

“As well as tra­di­tional ri­vals like Tesco and Sains­bury’s, and the up­starts Aldi and Lidl, the food di­vi­sion is up against a new breed of on­line com­peti­tors such as Hello Fresh, De­liv­eroo and Just Eat. These providers present a par­tic­u­lar threat to M&S see­ing as many of its cus­tomers are buy­ing a quick meal for that night, rather than a full weekly shop.

“M&S is in the midst of the turn­around plan, and so busi­ness per­for­mance can be ex­pected to be rocky for the time be­ing. Though at some point in the not too dis­tant fu­ture, in­vestors will want to see some light at the end of the tun­nel.”

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

Mr Rowe said the re­tailer was “leav­ing no stone un­turned” in its rad­i­cal trans­for­ma­tion plan.

“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,” he said.

“We are fix­ing the ba­sics of our on­line chan­nel and there are very early signs of im­prove­ment.

“Ev­ery as­pect of our ranges, how we trade, our sup­ply chain and mar­ket­ing is un­der­go­ing scru­tiny and change.”

The most re­cent mis­sive from M&S makes for grim read­ing.

DRESS SENSE:TV pre­sen­ter Holly Wil­loughby is a brand am­bas­sador for M&S as it aims to re­store its for­tunes. In­set, chief ex­ec­u­tive Steve Rowe.

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