Published: Wed, May 23, 2018
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M&S says annual profits tumble on restructuring

M&S says annual profits tumble on restructuring

M&S is to close 100 stores, amounting to one in three of its core clothing and home branches, over the next four years.

Marks & Spencer stores in Wakefield, Castleford and Pontefract has avoided the latest round of planned closures, it has been announced.

M&S reset its strategy in November, two months after retail veteran Archie Norman joined as chairman, detailing a five-year programme of store closures and relocations, and moves to make its misfiring food business more competitive. "Accelerated change is the only option".

Excluding the restructuring charge, the stores group's adjusted pre-tax profit was down 5.4% to £580.9mln from £613.8mln past year, weighed by a 140 basis points drop in the food gross margin as a result of a weaker pound pushing up input cost inflation. The company also plans to close 14 Clothing & Home stores in its recently-commenced financial year.

"In the previous year traditional retailers like Marks have faced a ideal storm of rising costs, a constrained consumer, and the relentless growth of online competition", said Hargreaves Lansdown analyst Laith Khalaf.

M&S profits plunge 62pc amid sweeping store closure plans

Currently, around 18 percent of M&S' clothing and home sales are made online. Operationally, M&S said it will reposition the Food business in the year ahead to become more "relevant". The first phase of our transformation plan, restoring the basics, is now well under way and the actions taken have increased the velocity of change running through our business.

"The new organisation will largely be in place by July and the team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business".

The company is looking to improve its website, as well as investing to increase and improve e-commerce capacity, to support its ambition of doubling the online share of its Clothing & Home sales to over 33%. "These changes come with short term costs which are reflected in today's results", said Steve Rowe, Marks & Spencer CEO in a statement.

The retailer said it has lost its share of younger family-age customers and larger households, and was looking to recover this with more stylish non-food lines and food products offering innovation, better value for money, and focused on more popular family foods.

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