Steve Rowe's recovery in doubt as M&S profits take a dive on clothing woeComments Off on Steve Rowe's recovery in doubt as M&S profits take a dive on clothing woe
Profits at Marks & Spencer collapsed in its first half, the embattled retailer revealed today, as recovery in its clothing and home arm once again proved elusive.
The 132-year-old company, which has lost the way with fashion ranges and seen lower-priced rivals triumph, said underlying pre-tax profits plunged 18.6% to £231.3 million in the six months to October 1.
That highlighted how far the chain has fallen since its heyday in the late Nineties, when it became the first UK retailer to make annual profits of more than £1 billion.
The fall was caused by a 5.9% slide in sales at clothing and home and chief executive Steve Rowe has made a turnaround in this department his priority. Food sales also fell.
Shares fell 3.1p to 345p despite Rowe — an M&S lifer who took the top job in April — pledging to overhaul the UK stores estate and the struggling international arm.
In the UK, M&S will shut 30 stores which carry its full range of products, cut clothing space by 10% and revamp 45 stores to stock only food in the next five years.
Overseas, it is quitting 10 loss-making markets, which will cost between £150 million and £200 million. Rowe said of the changes: “These are tough decisions, but vital to building a future M&S that is simpler, more relevant, multi-channel and focused on delivering sustainable returns.”
Haitong analyst Tony Shiret said shrinking clothing space by 10% was “clearly not enough” and that M&S needed a good Christmas. “M&S as a minimum needs… to achieve the market consensus estimates as a base upon which to restructure and persuade the market that it is not becoming Debenhams,” Shiret said.M&S reassured customers that it would not raise prices to offset the fall in sterling, saying prices were more likely to fall than increase in the short to medium term.