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Marks & Spencer full year results: what the analysts said

Marks & Spencer this morning revealed a 3.9% fall in pre-tax profits to £623m in the year to March 29, as group sales climbed to £10.3bn. General merchandise sales were flat. Here, Drapers rounds up what the analysts made of the retailer’s results.

Jon Copestake, retail analyst at The Economist Intelligence Unit, said: “Three years into Bolland’s turnaround strategy M&S continues to struggle against the structural problems that were in place when he took the reins. Clothing sales in particular are continuing to decline and profits are falling, although revenue growth, international expansion and rising food sales do present an evolution in strategy towards a less apparel focussed and more global retail brand. 

“The rise of firms like Asos and Primark and continued growth of Next have all undermined the M&S clothing brand. Meanwhile the UK market remains tough and a switch to invest in online channels and new markets requires a capital investment that will continue to undermine profits in this transitional period. But there have also been costly mistakes which point towards an occasional lack of strategic coherence and, with Next now overtaking M&S  in terms of profit, many will view the culmination of the current turnaround strategy to have been underwhelming.”

Nick Bubb, independent analyst, said: “The market was expecting M&S to report PBT of just £615m today for 2013/14, down from £665m in 2012/13, but last year has been restated to £648m and so the slightly better than expected outcome of £623m is only 4% down. Perhaps that’s why the cheeky headline of today’s press release is “From transformation to delivery” and M&S certainly need to focus on delivery in the new-year, after a lot of investment and a lot of talking.

“The 100bps gross margin recovery forecast for general merchandise is solid, reflecting the improved sourcing skills in clothing, but the forecast of 4% overall cost growth may be a bit higher than some had hoped.

“In 2014/15, the market is banking on Food continuing to do well, but the swing factor has to be general merchandise if the much-mooted overall profit recovery is to materialise this year. It is therefore reassuring that the new-year has started quite well for clothing in the stores, no doubt helped by the generally warmer weather, but it sounds like the much-vaunted new website has teething problems as M&S have warned that online performance will hold back overall General Merchandise sales in Q1.”.

Espito Santo’s Tony Shiret said: “We found these 2013/14 results disappointing… we expected firmer indications on capital repatriation, a better general merchandise gross margin recovery than now indicated and we note the comments on online “settling” in the early year. We expect some pressure (5%?) on 2014/15 consensus forecasts continuing the recent pattern.

“These results continue the recent pattern of a moderate level of forecast slippage and as such we expect investors to remain sceptical of the group’s ultimate recovery/growth prospects until clearer trends can be demonstrated.”

“We would also point to the fairly muted general merchandise gross margin guidance. The company is saying that 75% of the guidance will be delivered through the bought-in margin, with further to come in the following years as it revises its buying methods.

“So the gross margin could be interpreted as a mixed picture whereas the company has been making much of this in recent times. This is an interesting area largely because the company seems to be reverting back to the type of supplier-pressure strategy deployed when Stuart Rose became chief executive in the mid-2000s. We are sceptical that this works longer term albeit it may provide some numbers protection in the shorter term.”

Readers' comments (1)

  • A succession of CEO's have failed to really understand the real reason for the poor performance. in my opinion these are
    1. lousy fashion in poor taste. Print and style selection which is old fashioned and unappealing
    2. Prices that are too high for what you are getting.
    3. Running costs that are way too high
    4. Store ambience that is dreary - even in the new Pantheon store
    5. Marketing that is as aspirational as a wool jumper in navy
    6. Food market that is competent but unexciting
    A final comment; why can Uniqlo do a basics business much better than M&S. This is like loosing a home game 5-0
    Why is Waitrose ready prepared food more modern and interesting than M&S. Another home game drubbing
    Why, when M&S probably spend more on design and color services do they get design and color wrong so often.
    Answer- leadership that just don't get it!!

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