Marks & Spencer revealed this morning just how bad a year it has had: after topping £1bn in the previous year, group pre-tax profits plummeted 37% to £706m, amid slumping UK sales and shrinking margins. In fact, shareholders had nothing much to shout about: the dividend has been cut by a third, Sir Stuart Rose’s successor still isn’t sorted, and apparently it still isn’t seeing any signs of recovery – in fact, it described the current environment as ‘one of the toughest for a very long time’. So things could yet get worse before they get better…
Sir Stuart admitted today that that last year had been a ‘difficult’ one for M&S. Although group sales were broadly flat, thanks to a 26% hike in international revenues, it’s clearly been having a tough time in the UK: like-for-likes were down nearly 6%, with food down 5% and general merchandise (everything else) down 7%. To try and woo back custom, M&S has been forced to cut prices to get us back into the shops – but although this has stemmed the flow to some extent, it’s also hammered profits. Margins were down 170bp last year (and could drop by another 175bp this year), resulting in a big hit to the bottom line.
The dividend has been the most notable casualty of this decline: after eight years of continuous hikes, it’s been slashed from 22.5p to 15p – a bigger cut than City analysts were expecting. M&S is also trying to cut costs elsewhere: under-performing stores have been closed, 1,250 jobs have gone, and it’s even persuaded that trooper Myleene Klass to take a pay cut. Given the amount of stick M&S has taken over bras recently, it'll be glad of her support (boom boom). In addition, it's trying to ramp up its better-performing areas (including banking, rumour has it, although Rose was pretty coy about it today).
Sir Stuart has also appointed FD Ian Dyson to run a ‘2020 executive change team’, tasked with bringing about a ‘step change’ in the retailer’s customer service. Rose’s critics will argue that this shouldn’t be necessary, five years into his tenure – but it does suggest that Dyson is in the box seat to take over the top job when Rose departs. One possible alternative, international boss Carl Leaver, is out of the running: he’s apparently decided the role ‘doesn’t fit with his career aspirations’ (whatever that means).
But with trading in the first quarter apparently much the same as last year, there’s no sign that M&S is seeing any green shoots of recovery yet, unlike some other retailers. So Sir Stuart has a lot of work to do if he wants to retire with his reputation restored to its former glory...
In today's bulletin:
Marks & Spencer slashes dividend as profits dip
Could we make a killing on our bank stakes?
Deflation worsens as retail prices drop at record rate
A better-than-even chance of losing your money
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