M&S reports further slump in profits by 63.5% - but will continue to focus on food

M&S reports further slump in profits by 63.5%  - but will continue to focus on food

CEO Steve Rowe said “As we anticipated, the planned restructuring of M&S has come with a cost”

Marks and Spencer has announced a significant fall in profit following the release of its full year results to April 1, 2017. Pre-tax profit was £176.4m, 64% less than last year. The reduction is due to exceptional charges of £437.4m relating to the Group’s turnaround and restructuring strategy. Before adjustments, profit was £613.8m, 11% less than in 2015/16.

The exceptional charges relate to costs as part of business turnaround strategy brought in by Chief Executive Steve Rowe. It includes items for international and domestic store closures and those at M&S bank for insurance mis-selling. This strategy has also included a reduction of promotional activity in clothing and home, and a focus on quality and execution. Clothing and home is the main area of decline with a -5.9% decreased in like-for-like clothing sales, whilst food showed a -2.1% decrease in sales.

A full like for like comparison with the previous year was not possible due to the late Easter holiday period in April and may explain why turnover has fallen.

Part of Rowe’s new strategy is to ‘continue to grow food’, being contributed to by an opening of 68 new Simply Food stores, including one relocation. A further 250 new Simply Food stores are planned by 2020. In 2016/17 around 1,600 new or improved lines were introduced, as well as expanding the ‘Made Without’ range.

Steve Rowe, Marks & Spencer CEO said:

“Last year we outlined a comprehensive plan to build strong foundations for the future. We said we would recover and grow clothing and home, continue with our plans for Food growth, remove costs and simplify the business. We achieved a huge amount in the year and whilst there is still much to do, I am pleased with our progress and we remain on track.

“In addition, our new Food stores continue to exceed our expectations.

“As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits, but the business is still strongly cash generative and we reduced our net debt.

“Looking ahead, we will continue our programme of self-help in a tough trading environment. We remain committed to delivering for our customers and shareholders as we build sustainable foundations for the future.”