Falling clothing sales are seriously hurting the retailer
Marks & Spencer has reported a 63.9% slump in pre-tax profits to £176.4 million for the year to April 1st, as the UK retailer's high street woes continue.
On an adjusted level, profits were down 11% to £613.8m, though they did slightly beat Bloomberg's analyst expectations.
The company cited weak clothing sales and restructuring costs for the poor showing. Clothing and homeware sales fell 3.4% over the year and are only getting worse, dropping 5.9% in the fourth quarter. Sales overall were broadly steady at £10.6bn, while food revenue climbed 4.2% thanks to new stores.
Strong cash generation reduced net debt £204m to £1.9bn. Full year dividend unchanged at 18.7p.
The timing of a December sale and Easter falling later in 2017 were also blamed for dents in third and fourth quarter profits respectively.
Chief executive Steve Rowe cast the results in a positive light, stating:
"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.
"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. 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."
Last November, M&S started to implement the findings of a sweeping strategic review by announcing that it would close 30 UK stores and leave 10 international markets. Irish stores have been unaffected thus far.
The company is now pushing its food business ahead of clothing and has opened 68 new food stores since the review.
John Ibbotson, the director of the retail consultancy Retail Vision, was highly critical of the company's performance, saying:
"With inflation eating into the profits of the once reliable food offering, and a string of one-off expenses slicing into profits elsewhere, the net result has been to send pre-tax profits tanking by nearly two-thirds.
"M&S remains a dysfunctional dichotomy – premium food with dowdy clothing."