LONDON (Reuters) – Marks & Spencer (MKS.L) mentioned on Wednesday it must modernize urgently to outlive after a second straight annual profit fall and a 321 million pound cost for a retailer closure program.
Shares within the 134-year-old British retailer had been up 5.four p.c at 0720 GMT because the underlying profit determine beat analyst forecasts and it maintained its dividend, whereas turnover was broadly flat at 10.7 billion kilos.
M&S, among the finest recognized names in British retail, faces unrelenting competitors from supermarkets, vogue chains like Zara, H&M and Primark, in addition to Amazon, whereas stress on client spending is hampering efforts to revive its enterprise.
In November, two months after retail veteran Archie Norman joined as chairman, M&S detailed a five-year program of retailer closures and relocations, and strikes to make its misfiring meals enterprise extra aggressive.
M&S shares have fallen 26 p.c during the last 12 months and it dangers being booted out of the FTSE 100 index as it’s now value lower than each on-line grocer Ocado (OCDO.L) and on-line vogue web site ASOS (ASOS.L), starkly illustrating how buying habits have modified in solely a decade.
On Tuesday M&S mentioned it might shut 100 UK shops by 2022, because it strives to make no less than a 3rd of clothes and residential gross sales on-line. At the top of 2017/18 M&S had 1,035 shops within the UK, with 300 Clothing, Home and Food, 696 Food-only and 39 Outlet shops.
“We have to modernize our business to ensure we are competitive and reignite our culture. Accelerated change is the only option,” M&S mentioned in a press release.
M&S mentioned it made a pretax profit earlier than one-off gadgets of 580.9 million kilos ($778.6 million) within the 12 months to March 31, notably damage by a lower within the meals gross margin.
That was forward of analysts’ common forecast of 573 million kilos however down from 613.eight million kilos made in 2016-17.
After taking account of adjusted gadgets of 514.1 million kilos, together with the cost regarding retailer closures, pretax profit was 66.eight million kilos, a 62 p.c fall.
Steve Rowe, an M&S lifer who has been CEO for 2 years, mentioned the agency was taking steps to repair the structural points.
“The team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business,” he mentioned, focusing on sustainable, worthwhile progress in three to 5 years.
M&S misplaced extra floor within the fourth quarter, with like-for-like clothes and residential gross sales down three.four p.c, worse than the earlier quarter’s 2.eight p.c drop, and similar retailer meals gross sales down zero.6 p.c, towards a 3rd quarter zero.four p.c fall.
Prior to Wednesday’s replace analysts had been on common forecasting an underlying pretax profit of 555 million kilos for 2018-19.
“We do not think the downgrade cycle may yet be over,” mentioned analysts at Liberum, sustaining their “sell” score.
And Toys R Us, electricals group Maplin and drinks wholesaler Conviviality have all collapsed this 12 months.
Additional reporting by Paul Sandle and Sarah Young, modifying by Kate Holton and Alexander Smith