Hopes that Marks & Spencer’s chief executive would “finally do what many had hoped: unveil a little black number”, were dashed this morning, says the Financial Times, when the retailer’s trading report for the last quarter “still had more hint of red than black”.
Like-for-like clothing and home sales fell 1.2 per cent compared to this time last year, down from a decline of 5.9 per cent for the previous quarter.
Overall sales in the division were down 0.5 per cent to £2.3bn, but full-price sales rose seven per cent as discounting was curved, which should boost margins and reduce costs, the Daily Telegraph reports.
This should help limit the impact on underlying profits, which fell more than 60 per cent last year due in part to restructuring costs amid a wave of store closures.
Comparable sales in the food division also fell, by a marginal 0.1 per cent. Overall food sales rose 4.5 per cent to £1.4bn.
Rowe said the results were “in line with our expectations” and that the retailer was “on track” with its turnaround plan announced last year.
However, investors were less enthused and shares in the retailer dropped three per cent in early trading.
Laith Khalaf, senior analyst at Hargreaves Lansdown, told Sky News: “Overall conditions for high street retailers remain pretty grim, with consumer purses under pressure and competition coming from all angles.
“M&S is swimming quite hard against this tide, so it deserves some credit for treading water.”
M&S shares defy ‘awful’ results
Marks & Spencer has posted “awful” results, John Ibbotson, director of the retail consultancy Retail Vision, told The Guardian.
Headline pre-tax earnings for the year to the end of March fell 64 per cent to £176.4m while underlying like-for-like sales, measuring comparative takings at stores open more than one year, were down 1.9 per cent. That included a 5.9 per cent fall for the keenly watched clothing division for the first three months of the year.
Ibbotson said: “M&S remains a dysfunctional dichotomy – premium food with dowdy clothing.”
Despite that, M&S shares rose more than two per cent through the morning to hit 396p – their highest level since last May.
That compares to a broadly flat performance for the FTSE 100, which is up 0.25 per cent this morning.
To some extent this is explained by the profit fall being exaggerated by £437m of one-off expenses, mostly related to a turnaround plan set in motion by chief executive Steve Rowe last year.
Taking these figures into account, adjusted profits fell around ten per cent to a little less than £614m – “higher than most analysts had expected”, says the BBC. Revenues were broadly unchanged at £10.6bn.
Rowe’s turnaround plan includes closing underperforming clothes stores and opening new food-only stores – total food sales in the UK rose 4.2 per cent in the first three months of the year.
Despite the timing of Easter hitting sales – the holiday fell in March last year, but April this year – the food department also saw a drop in like-for-like sales of just 0.8 per cent for the year to March.
In spite of the profit fall, M&S held its dividend unchanged at 18.7p per share, Reuters reports.
Perhaps the most positive news for analysts came earlier this month, when Archie Norman, the man credited with turning around Asda during the 1990s, was announced as M&S’s new chairman.
Coupled with positivity over Rowe’s changes Rowe and the appointment of new clothing chief Jill McDonald, analysts hope better times are ahead.
“Drastic action is needed to turn around M&S and Norman will not be afraid to take it,” said Ibbotson.
Ex-Asda boss Archie Norman called in to rescue M&S
Marks & Spencer has announced its new chairman will be former Tory MP Archie Norman, the man credited with turning around Asda during the 1990s.
The appointment comes just a few days after M&S hired the boss of Halfords, Jill McDonald. She will take on the store’s clothing, home and beauty business.
Retail analyst Nick Bubb told the BBC there were fears Norman was overqualified for a non-executive role. Bubb said: “Some people thought Archie was too heavyweight for the role, which is non-executive, and it remains to be seen how much of a ‘back-seat driver’ he is to CEO Steve Rowe.
“When he took over at the struggling Asda in 1991, he famously played down expectations of the turnaround and we see he is up to his old tricks again in today’s statement.”
Norman said: “I am looking forward to taking on the role of the chairmanship of Marks & Spencer as the business under Steve Rowe’s leadership faces into the considerable challenges ahead in a rapidly changing retail landscape.”
A statement from M&S said: “Archie brings a breadth of experience with an extensive track record in retail and brands. He was instrumental in transforming a number of major British businesses including Kingfisher, Asda and Energis.”
Now 63, Norman became known as the “turnaround king” during his Asda days, the Financial Times recalls. Norman took Asda from “the brink of bankruptcy” to be the UK’s second-biggest supermarket, says the paper.
He will take over from Robert Swannell, who joined the high-street stalwart in 2010. Norman stood down as ITV chairman last year and currently sits on the board of the Department for Business, Energy and Industrial Strategy, created by Theresa May last year when she merged Business and Energy.
He is the only person to have been simultaneously the head of a FTSE 100 company and a member of the House of Commons, having been MP for Tunbridge Wells between 1997 and 2005.
The news of Norman’s appointment was followed by a jump in excess of five per cent for M&S’s share price.
M&S hires Halfords chief to run clothing arm
Marks & Spencer has finally announced the successor to Steve Rowe in its struggling clothing arm, following his move to chief executive of the company in January.
Halfords boss Jill McDonald will take over in the autumn, after she works out her notice at the bikes and car parts retailer.
She said: “I have long been an M&S customer and professional fan, so working with the brand was a career opportunity that I just couldn’t turn down,” reports the BBC.
The move is the latest step in M&S’s efforts to turn around the clothing business, which encompasses all core non-food lines but has struggled to keep pace in an increasingly competitive market both on the high street and with the rise of online retailers.
The company has announced a design shift back towards the over-50s “M&S woman” who were once its staple. It also plans to close a number of underperforming stores.
M&S has been searching for a permanent replacement since Rowe moved up and “had courted former Next product director Christos Angelides, but he signed up as head of the Reiss clothing chain”, says The Guardian.
Jo Jenkins, the retailer’s head of womenswear, lingerie and beauty, will report to McDonald but will have an expanded role which also covers menswear and childrenswear, adds the paper.
Marks & Spence results ‘the surprisise Christmas package’
Marks & Spencer stands out as arguably the “surprise Christmas package” among the mostly positive retailer trading updates this week, says the BBC.
The department store today reported that like-for-like takings in its non-food segments rose 2.3 per cent for the quarter to 31 December – the “first signs of growth in its clothing business for nearly two years”, says the Financial Times.
Overall, M&S’s like-for-like sales rose 1.3 per cent after slower growth in its food business, which still continued its impressive run and gained market share from rivals.
Chief executive Steve Rowe, who took over the business last April, said: “It’s about seven years since we’ve had a set of results like this”.
They “may be better than some people’s expectations, but they are where we expected to be”, he added.
During his time in office, Rowe has scaled back substantially on promotions and eschewed the Black Friday discounting weekend altogether this year.
He has also simplified the product range and refocused on a core audience of women over the age of 50, culminating in the “Mrs Claus” festive advertising campaign, featuring actor Janet McTeerwearing a red dress the company said sold well in stores.
According to the BBC, around 1.5 per cent of the clothing advance was down to how Christmas falling on a Sunday last year, allowing for five more trading days in the quarter compared to 2015.
“The real test will be at the next quarterly update, where the calendar is against Mr Rowe,” it says. “If he can turn in another positive number on clothing, there will be substance to the M&S revival.”
M&S shares were up nearly three per cent earlier today, but gains were trimmed to a more modest 0.9 per cent by mid-afternoon, trading at 343p per share.