Profits edge up though M&S recovery 'falters'

Marks & Spencer profits have shown a slight rise, but the company has conceded that the anticipated turnaround by the group has faltered.

Pre-tax profits were up by 0.5% to £763.2 million, which was a little better than analysts had been forecasting for the retail chain group.

However, Chief Executive Roger Holmes said that while Money and Home divisions had experienced an initial surge in the recovery, the Clothing and Food business had "faltered".

The company's clothing share declined by 0.2% reflecting under-performance in Womenswear, particularly Knitwear, and Childrenswear. Although the company's market share held up in Food, this was only achieved by a roll-out of the Simply Food stores.

Mr Holmes said that Marks & Spencer were "addressing these issues by taking action covering our products, supply chain, stores and ways of working".

He said: "Following the significant shift of our production overseas we are now focusing on the second phase of our supply chain development. This will include further rationalisation, an increase in direct sourcing and the elimination of duplication in our logistics network. We will continue to re-invest part of our sourcing gains in lower prices, particularly in the entry price points to each range.

"In Food we will develop our appeal and reduce reasons for customers to visit elsewhere by delivering our existing plans for Simply Food and continue to renew at least 30% of our food range during the year, particularly for special events."

The M&S boss said that there was "plenty of opportunity to make the business more efficient".

The company plans to accelerate its Retail Change Programme in stores and reduce head office costs.

Concluding, Mr Holmes said: "We still have a lot to do but I am confident that we can succeed. I am supported by a talented management team and committed colleagues from across the business. We share a passion to see Marks & Spencer thrive and believe that our plans can put the business on a more secure footing."

Departing Chairman of Marks & Spencer Luc Vandevelde described the group's results as "solid", but that sales progress in terms of gaining market share had not been satisfactory.

Marks & Spencer proposed a final dividend per share of 7.1 pence, up 9.2% compared to last year, giving a full year dividend of 11.5 pence per share.

(SP)