Marks & Spencer posts second straight fall in year profit

London — British retailer Marks & Spencer posted its lowest annual profit since 2009 on Tuesday 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 ($1.0 billion) 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 percent to £10.0 billion.

 

M&S, whose shares have risen 30 percent 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 center 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.

 

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 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.

 

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 percent rise in operating costs.

 

Group capital expenditure (capex) was forecast at £775 million, a reduction on previous guidance of £850 million.

 

From 2014-15 M&S expects capex to fall to about £550 million versus previous guidance of £600 million.

 

Shares in M&S closed on Monday at 451 pence, valuing the business at £7.28 billion. — Reuters