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Marks & Spencer's first-half profits fall for second year running Marks & Spencer's first-half profits fall for second year running
(about 3 hours later)
Marks & Spencer has reported a drop in first-half profits for the second year in a row after it paid the price for missing key fashion trends in womenswear earlier in the year.Marks & Spencer has reported a drop in first-half profits for the second year in a row after it paid the price for missing key fashion trends in womenswear earlier in the year.
Pre-tax profits fell 10% to £289.5m in the six months to 29 September, which was ahead of City expectations of £280m. There were signs of improvement in the high street retailer's important clothing and homewares business, however, with like-for-like sales down 1.8% in the second quarter compared with the near 7% slump recorded in the previous period. Like-for-like food sales rose 1.6% which was in line with analysts' expectations. It has since made a string of senior appointments to its clothing business with the chief executive, Marc Bolland, promising that next year M&S clothing ranges would become "much more stylish and more trend driven". It had remedied housekeeping issues that in previous quarters resulted in major shortages of bestselling products including coats, knitwear and shoes, with Bolland stating: "We took steps to address the short term issues in general merchandise and as a result we delivered an improved performance."
"We are pleased to report a better performance across the business in the second quarter," said chief executive Marc Bolland, who has blamed its dire first-quarter figures on the failure to buy bestselling lines in sufficient numbers. "We took steps to address the short-term issues in general merchandise and as a result we delivered an improved performance." Pre-tax profits at the retailer fell 10% to £289.5m in the six months to 29 September, which was ahead of City expectations of £280m. There were also signs that the retailer had regained control of its misfiring clothing business with like-for-like general merchandise sales down 1.8% in the second quarter compared with the near 7% slump recorded in the previous period. Like-for-like sales at its food division rose 1.6%.
At M&S's annual results in May Bolland scaled back ambitious sales growth targets set when he joined the business in 2010. However his goal to transform M&S from a "traditional British retailer to a leading international, multi-channel retailer" remains on track. Last week it announced a free next day collection service for internet orders at 450 UK shops. It also flagged the imminent launch of local language and currency websites to serve customers in Germany, Spain, Austria and Belgium, adding to dedicated sites for France and Ireland. Bolland had previously admitted it had failed to buy products featured in its advertising campaigns in sufficient volumes. It had not repeated the mistake, he said, with the retailer buying five times as many of the advertised lines as last year to avoid disappointing shoppers. It had also backed key fashion trends with more confidence, with the retailer already shifting 44,000 military-style coats.
Retail analyst Nick Bubb said the interims had "inevitably" beaten cautious market expectations, adding: "Marc Bolland will have to get profits moving up at M&S if he wants to keep his job, but as we flagged last week there is a quiet confidence at M&S about online growth potential and autumn clothing trading should have been quite good." The problems within its general merchandise business came to a head with the recent departure of clothing supremo Kate Bostock. Her departure has triggered a reshuffle including the promotion of food boss John Dixon as her replacement. M&S has also drafted in former Debenhams chief executive Belinda Earl as style director and Janie Schaffer from US chain Victoria's Secret to head up lingerie, freeing up current lingerie boss Frances Russell to lead the high profile womenswear division.
In common with Next boss Lord Wolfson, Bolland said recent trading has been "volatile": "This, coupled with continuing pressure on consumers disposable incomes, makes us cautious about the outlook for the rest of this year. However, we are well set up for the Christmas trading period." Bolland said the fruits of the new team's work would not be seen until July, when the first autumn products start to arrive in store, as summer ranges have already been bought by their predecessors: "You cannot expect them to make an impact on something that has already been bought," he said. "We have to give them some time."
Analysts at Singer Capital Markets said the figures suggested Marks was beginning to get back on track: "M&S has been dogged by ranging and buying issues over the last few quarters, part of which may have stemmed from management uncertainties and this update suggests they are taking control in this regard after securing a new team." In common with Next boss Lord Wolfson, Bolland said recent trading has been "volatile": "This, coupled with continuing pressure on consumers' disposable incomes, makes us cautious about the outlook for the rest of this year. However, we are well set up for the Christmas trading period."
M&S's fortunes contrast with Primark which reported a 15% jump in operating profits to £356m for the year to 15 September. Like-for-likes climbed 3% with owner Associated British Foods flagging strong trading in the UK particularly over the summer months and "encouraging" sales of its winter ranges in the new financial year.M&S's fortunes contrast with Primark which reported a 15% jump in operating profits to £356m for the year to 15 September. Like-for-likes climbed 3% with owner Associated British Foods flagging strong trading in the UK particularly over the summer months and "encouraging" sales of its winter ranges in the new financial year.