The Courier & Advertiser (Fife Edition)
M&S cut sales targets
MARKS & SPENCER boss Marc Bolland slashed his sales targets for the high street retailer yesterday as he unveiled its first fall in profits in three years.
Despite efforts to pull in customers with celebrity-laden advertising campaigns featuring the likes of actresses Joanna Lumley and Rosie Huntington-whiteley, like-for-like sales of general merchandise fell 1.8% in the last year.
The decline was driven by a mixed performance in womens-wear and home, with the latter impacted by the company’s decision to exit the technology market.
Helped by a stronger performance in food, M&S saw underlying pre-tax profits drop 1% to £705.9 million in the year to March 31, while total sales grew 2% to £9.9 billion.
In November 2010 Mr Bolland set a target to grow revenues by between £1.5bn and £2.5bn over three years but as a result of the harsh economic climate has cut this target to between £1.1bn and £1.7bn.
In addition, Mr Bolland said the group now expected to invest £200m less in its UK stores over the remaining two years of its strategy review.
M&S saw its profits smash through the £1bn barrier for the first time in a decade in 2008 but the financial crisis hurt shoppers and heralded an era of fierce discounting on the high street.
The dip in profits was the first fall since 2009 and comes hand in hand with a flat dividend award for shareholders of 17p.
While the squeeze on household incomes in the UK, where M&S has 700 stores, has driven the weaker performance, some analysts also placed a failure to keep up with its rivals in clothing at the heart of its problems.
While Mr Bolland hailed the group’s “significant progress”, the firm declined to comment on current trading, which is likely to have been severely hit by the wet weather.
Independent retail analyst Nick Bubb said the performance “relied on some formidable cost control”.
The group launched 15 pilot stores in November to trial an easier shopping environment for customers with improved navigation.
Sales in the trial stores are 2.5% higher than the norm and the group has decided to roll out this format to the rest of its UK stores.
The group is launching the second phase of its new format design, which includes a new beauty, footwear and home range.
In clothing, the group said its Good range was not “strong enough” and was hit by merchandising issues in the final quarter of the year.
There was some strong growth in areas such as men’s everyday essentials, which saw sales rise 11%, while kidswear delivered a record year.
Home sales fell 10% in the period as customers pulled back from purchasing big ticket furniture items and after the group pulled out of the tech market.
Total food sales were up 3.9% to £4.7bn as M&S took on the heavy promotions at supermarkets with its Dine In For £10 and meal deal for £5 offers.
M&S said it would slow down its store growth over the next two years due to the growth of its online market, growing space by 3% this year and 2.5% next year.
Multi-channel sales, which includes online, were ahead 18% with an average of 3.4m weekly visitors to the website, up 11% on last year.
International sales were up 5.8% in the year with India, China and Hong Kong driving growth but held back by tough conditions in Ireland and Greece.