M&S posts 6% rise in annual profits after late rally in clothing sales
- Credit: PA
Marks & Spencer today reported its first rise in profits for four years.
The 6.1% increase in underlying pre-tax profits to £661.2million comes despite a year in which the retailer admitted it missed expectations for its struggling general merchandise division, including clothing.
However, the final quarter of the year saw the division show signs of a turnaround after it posted a rise in like-for-like sales following a string of declines.
Chief executive Marc Bolland said: “We are transforming M&S into a stronger, more agile business, putting the right infrastructure, capabilities and talent in place to drive our strategic priorities.”
General merchandise like-for-like sales fell by 3.1% for the year to March 28 but there was a strong improvement in the profit margin, the group said.
Mr Bolland said: “While sales performance was below our expectations, we returned to growth in the fourth quarter.”
Costs and capital investment were controlled tightly, he added.
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Mr Bolland said the M&S food division had “an outstanding year in a difficult market”.
M&S had suffered 14 consecutive quarters of falling sales in general merchandise before efforts to improve its fashion offer appeared to start paying off in recent months, as sales lifted by 0.7% in the most recent period.
Items such a much-talked about 1970s-style suede skirt worn by TV presenter and model Alexa Chung have helped improve the image of Marks’s clothing range.
M&S pinned the blame for its disappointing clothing sales performance for the year partly on the autumn weather, which it said was the third warmest on record, hitting sales of coats and knitwear.
There was also disruption at its online distribution centre over the peak Christmas period but the group said there had been good progress since then, with M&S.com sales back in growth in the fourth quarter.
International sales were down 2.1% on a constant currency basis with turbulence affecting franchises in Russia, Ukraine and Turkey.
Standalone food stores in Paris and Hong Kong were performing well while a shake-up of the M&S business in China saw smaller regional outlets closed and the announcement of flagship stores to open in Beijing and Guangzhou.
M&S said it would increase its final dividend by 7.4% to 11.6p meaning a 5.9% increase in the full-year dividend to 18p.
Chairman Robert Swannell said: “We are a more capable business following a sustained period of investment in our infrastructure and in our people.”
M&S said that looking ahead it saw “modest sales growth” in its general merchandise division and “significant” profit margin improvement through better sourcing.
Capital spending for the year for the group is expected to be £500m to £550m. More Simply Food stores are being opened, with the number planned in the three years to March 2017 up from 200 to 250. The current year will see food add 4.5% of space but no increase for general merchandise.
Food saw 0.6% like-for-like sale growth over the 2014/15 year in a period when other grocers have seen sales sliding under pressure from discounters Aldi and Lidl.
M&S said the food market would remain “challenging” but it was “well positioned with a differentiated product offer”. Looking ahead it expects “strong sales growth and modest growth margin opportunity in the division”.
On general merchandise, the company said: “Whilst we expect the clothing and home markets to remain highly competitive, we will continue to focus on stylish design, quality and newness, with better availability and more choice.
“Our M&S.com website and e-commerce distribution centre will help us drive online sales growth and improve our profitability.”