British retailer Marks & Spencer posted its lowest annual profit since 2009 this morning as a struggling clothing and homewares division dragged on growth in food sales.
The 129-year-old firm, which serves 21 million shoppers a week from over 700 UK stores, said it made a profit before tax and one-off items of £665.2 million (€784.1 million) in the year to March 30, a second straight fall.
The outcome compares with analyst forecasts of £640-670 million, with a consensus of £658 million, according to a poll published on the company’s website, and is a decline on the £687.2 million made in 2011-12.
Group sales rose 1.3 per cent to £10.0 billion.
M&S, whose shares have risen 30 per cent over the past year after periodic bouts of bid speculation, kept its annual dividend at 17 pence a share.
The group forecast “underlying profit improvement” in the 2013-14 year but cautioned it expected to incur about £30 million of non-recurring dual-running costs, as a result of the transition to a new web platform and the opening of a new distribution centre in Castle Donington, central England.
Many UK retailers are finding the going tough as consumers, whose spending generates about two-thirds of UK gross domestic product, fret over job security and a squeeze on incomes.
M&S's profit fall, which reflected seven consecutive quarters of underlying sales declines in general merchandise, will likely impact the performance-related annual bonus of chief executive Marc Bolland.
Shares in M&S hit a five-year high last week after its clothing strategy update and eagerly awaited autumn/winter ranges were well received by analysts and the fashion press.
Mr Bolland, CEO since May 2010, is under pressure from investors to revive M&S's clothing, which has been losing market share to firms like Primark and Debenhams.
The autumn/winter ranges are widely seen as make-or-break for a new general merchandise team, assembled by Mr Bolland and led by John Dixon, the former boss of M&S's food business, and Belinda Earl, the former CEO of Debenhams and Jaeger.
Mr Bolland has repeatedly said the new team will not make a major impact on sales until the ranges start hitting the shops in late July.
M&S said trading over the first seven weeks of the new financial year had been in line with its expectations.
For 2013-14, it forecast gross margin growth of 30-50 basis points and a 3.5 per cent rise in operating costs.
Group capital expenditure was forecast at £775 million, a reduction on previous guidance of £850 million.
Shares in M&S closed on Monday at 451 pence, valuing the business at £7.28 billion.
Reuters
