M&S: Steve Rowe announces turnaround plan for clothing business

For the 53 weeks ending April 2, 2016, Marks & Spencer (M&S) Group revenues were 10.6 billion pounds (15.4 billion dollars), up 2.4 percent, while underlying pre-tax profit rose 4.3 percent to 689.6million pounds (1,008 million dollars). But pre-tax profit fell 18.5 percent, to 488.8 million pounds (714.5 million dollars) as basic earnings per share dropped 16.2 percent. The company has said that trading conditions through the year remained challenging. Meanwhile, new Chief Executive Steve Rowe has announced a turnaround plan for its Clothing & Home business.

Commenting on the company’s performance, Steve Rowe, Chief Executive, said, “Our results last year were mixed. We continued to outperform on Food but we underperformed on Clothing & Home sales. This is not satisfactory and today we are outlining our initial plans to address the issues and to position Marks & Spencer to deliver profitable sales growth. We are clear on the actions needed to recover and grow Clothing & Home, which is our top priority.”

Initiates plan to revive Clothing & Home business

The company changed the structure within its Clothing & Home business combining womenswear, lingerie and beauty business units and reducing prices of some 300 core products. As the first phase of its strategic plan to recover and grow Clothing & Home and continue to grow Food, M&S has planned several initiatives to win consumer confidence.

Clothing & Home sales performance has been unsatisfactory for a number of years, so the company plans to re-establish our style authority by focusing on wearable, contemporary style and wardrobe essentials. With product as a key, the company will continue to focus on quality delivered through fabric, fit and finish.

M&S also aims to restore its price position by investing in everyday price and reducing the number of promotions and sales. It will significantly reduce promotions and have fewer but better clearance sales in order to rebuild trust in our pricing stance.

M&S.com witnesses improved sales

M&S.com sales were up 23.4 percent year on year. 7.4million customers shopped online through the year. Mobile continued to be the fastest growing sales channel. During the second half of the year, M&S launched Sparks, its new membership club which combines tailored offers and personalised benefits for customers.

Underlying UK operating profit was 721.8 million pounds (1,054 million dollars), up 7.7 percent on last year, driven by improvement in both Clothing & Home and Food profitability. Sales in international business were down 2 percent and up 1.3 percent on a constant currency basis with operating profit down 39.6 percent, primarily driven by a decline in its owned businesses.

M&S saw challenging trading conditions in many of its owned markets, particularly in Western Europe. Although some markets, including Ireland and Greece, showed some improvement in sales performance, Euro currency pressures had a big impact on profitability as we absorbed the higher costs rather than passing them onto customers.

A number of its franchise markets, including Russia, Turkey and the Middle East, continued to be impacted by difficult macro-economic conditions. Group underlying profit before tax was up 3.5 percent on last year but profit before tax was down 19.5 percent.

As at the year end, the company opened 82 new stores and closed 20 stores. Overall, Clothing & Home space increased by 0.4 percent and international space increased by 1.4 percent, a reduction in the rate of growth on previous years.

In line with its capital allocation policy, the Board has proposed a 2.6 percent increase in the final dividend to 11.9p, subject to approval of shareholders at the Annual General Meeting, to be held on July 12, 2016. This will result in a total dividend of 18.7 p, up 3.9 percent on last year. As part of its ongoing programme of enhanced returns, M&S has also announced a special dividend amounting to 4.6 p per share for the first half of the 2016/17 financial year.

picture:marksandspencer.com