Outlook remains bleak for high street giant M&S

MARKS & Spencer warned of a bleak 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 retailer said.

The company has already announced plans to close around 100 stores in the UK as well as exiting some international 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. Likefor-like sales declined by 1.1 per cent.

Food revenue dipped by just 0.2 per cent overall, but like-for-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 £219.1 million a year earlier.

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

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

Chief executive Steve 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.”

Capital expenditure is now expected to be up to £350 million before disposals, lower than a previous estimate of up to £400 million.