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M&S full year results: analyst reaction

Following the announcement that Marks & Spencer reported a 6.1% increase in underlying profit before tax but clothing and general merchandise like-for-like sales fell 3.1%, for the year to March 31, retail analysts give Drapers their reaction.

Natalie Berg, director of retail insights at Planet Retail, said: “The rise in profitability can be attributed to a combination of a reduction in capital expenditure, increased sourcing efficiencies and a shift away from perpetual discounts. Simply put, M&S is finally buying for less and selling for more. Granted, it hasn’t been the smoothest of transformations and more work remains to be done, but today’s announcement will have certainly bought Bolland more time in the boardroom. However he remain cautious about a sustained recovery in womenswear. M&S continues to chase younger shoppers while attempting to stay relevant to their core mature customer. The new Limited London capsule collection debuts next month, but do M&S shoppers really want cropped T-shirts and skinny denim dungarees?”

Independent retail analyst Nick Bubb said: “The modest 6% rise in underlying pre-tax profits to £661m is a bit ahead of expectations but hardly makes up for five years of underperformance and disappointment. However hope springs eternal that if management can stabilise top-line sales then the big 150/200bps increase in the clothing gross margin will drop through to the bottom line. It will be interesting to see whether the increasingly less beleaguered chief executive Marc Bolland is emboldened enough to set a few profit targets for the business to aim at. 

Kate Calvert from Investec said: “The general merchandise guidance is encouraging. A multi-year opportunity within general merchandise to improve gross margins is clear in our view, through increased direct sourcing (presently 35% vs a 60% target by 2017). The 2016 margins are expected to be up 150-200bps, with the opportunity of achieving circa 400-500bps in our view, giving management scope to invest in product quality/pricing to drive top line growth or improve profitability.”

Jo Causon, chief executive of the Institute of Customer Service, said: “M&S cannot afford to be complacent. Customers are demanding greater levels of convenience, choice and communication and the risk, if they don’t see it materialise, is a drop in satisfaction levels and with it, market share. News of profits, for any retailer, is always good to hear, but business leaders must be mindful of neglecting the long-term health of their business in favour of short-term financial gains. In such a competitive market customer service is a key differentiator. To lose focus on this now would risk a perpetual decline in customer satisfaction.”

Julie Palmer, Partner at Begbies Traynor, said: “Three cheers for Marc Bolland, whose concertina turnaround plan has at last given M&S something to celebrate, after the retailer delivered its first increase in annual profits in four years. However, M&S still has some way to go if it is going to live up to the example set by close rival Next. While M&S may outperform in revenue terms, Next wins  hands down when it comes to profits, suggesting Bolland could drive operational efficiency and boost profit margins still further. The question now on everyone’s lips is; after proving his worth in arguably the toughest job in high street history, will Marc Bolland quit while he’s ahead and seek out new challenges? After all, fashion is a fickle business.”

Conlumino senior retail consultant, Anusha Couttigane, said: “The effects of last year’s poor autumn sales meant that general merchandise (including its core Clothing division) saw an overall decline of 2.5%. This is a disappointing outcome for Mark & Spencer, given the celebrated results of Q4, which saw like for likes in GM including Clothing return to growth for the first time in four years. However, one happy quarter does not a full recovery make and these results indicate that while M&S is making clear progress, there is still a way to go.”

Readers' comments (1)

  • Onwards and Upwards well done to the Team! Still lots to do just have to get the consumer to understand the value they are offering is excellent for the price.

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