Science

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

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

M&S is expected to report a second straight fall in annual profit on Wednesday, and with the retailer's shares down almost a quarter over the previous year it is in danger of soon being booted out of the FTSE 100 index.

As Britain's biggest clothing retailer, Marks & Spencer is a bellwether for the health of the United Kingdom high street, and its bold move to close more than 100 stores by 2022-which it revealed today (May 23) will cost £321 million ($430 million)-is a sign that brick-and-mortar clothing shops are on their last legs.

Chief executive Steve Rowe said the charge was linked to M&S' overhaul plan, which was focused on "restoring the basics" and transforming the firm's culture towards a "a faster, lower cost, more commercial, more digital business".

The performance was dented by 321.1 million pounds in costs linked to the retailer's ongoing store closure programme in Britain. That figure dropped by 5.4pc to £580.9m, with the City predicting a steeper fall to £572.6m.

Deutsche Bank maintained the shares of MKS in report on Tuesday, January 2 with "Hold" rating.

Clothing & Home revenue fell 1.4 percent to 3,741.1 million pounds for the 52 weeks to March 31, 2018, with like-for-like revenue down 1.9 percent.

M&S profits plunge 62pc amid sweeping store closure plans
M&S says it must accelerate change or fade away

"Until recently the food business was the bright spark which kept hopes for growth from M&S alive, but now that seems to have dimmed too", said Laith Khalaf, senior analyst at Hargreaves Lansdown. Operationally, M&S said it will reposition the Food business in the year ahead to become more "relevant".

M&S is also improving its website and investing in its e-commerce capacity, including a site at Castle Donington, with the aim of doubling its online share of clothing and home sales to more than 33%.

The food, clothing and homewares retailer maintained its full-year dividend at 18.7p.

"These changes come with short-term costs which are reflected in today's results".

M&S said it is taking steps to recover its appeal to "family-age" customers in Clothing & Home, reducing the number of lines and phases, buying "more stylish" products and emphasising value. Total UK sales grew 1.8% but on a like-for-like basis declined 0.9%.





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