No let-up as bleak outlook goes on for M&S
Retailer expects little improvement in sales
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.