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M&S profits fall below rival Next to £623m

Marks & Spencer’s underlying profit before tax has fallen 3.9% to £623m in the year to March 29, falling below that of rival Next for the first time.

The drop in profits come as M&S saw group sales climb 2.7% to £10.3bn, while UK sales rose 2.3%. This was powered by food however, with general merchandise – which is made up largely of clothing and where the retailer has put much of its focus in the last 12 months – flat.

Changes over the year in its clothing business have included improved quality, a greater distinction between the “good, better, best” options and fewer overall styles supported with the high profile ‘Leading Ladies’ campaign.

“After a year of changes our customers are noticing the difference, with clothing returning to growth in the fourth quarter for the first time in three years on a like-for-like basis,” M&S said.

Like-for-likes in the UK rose 0.2%, although general merchandise fell 1.4%. International sales rose 6.2% while multichannel sales climbed 22.8%.

Gross margins in general merchandise fell 110bps to 50.7%, with M&S noting this was caused by “a challenging clothing market, with unseasonal conditions and high levels of promotional activity”.

M&S blamed the same factors for its drop in profits, down to £623m for the year. This compares with Next, which saw pre-tax profits increase 11.8% to £695.2m in the year to January 25.

Underlying operating profit also fell, down 4.7% to £741.9m.  

Chief executive Marc Bolland said: “We are focused on improving our performance in general merchandise and were pleased to see early signs of improvement…  Three years ago, we recognised the scale of investment required to transform our business, investing to strengthen our foundations and improve our customer offer. We are making solid progress on this journey and are now focused on delivery.”

Of current trading, the business noted that the “improving trend in clothing sales we saw in the fourth quarter has continued in our stores”, although noted that M&S.com will take “four to six months to settle in , and, as a consequence, will have some impact on general  merchandise performance” in its first quarter, which will be reported on July 8.

Readers' comments (3)

  • Always seems to be another reason for sales not performing. Already warning of clothing not going to perform as strong because of the new site ? Surely clothing should be flying if the 150 million invested in the site was well spent !

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  • Their challenge is that the competition are moving way faster. They've lost their point of difference. With the exception of their grocery offering, they don't offer the quality they used to.

    As a stylist, my SS14 client shopping has, in the main, avoided M&S. Which supports these results. On the flip side, one of my customers alone spent £1,700 in John Lewis (in 35 mins with me by their side ;o)

    It's such a shame. I'm also worried if their AW14 will cut it. Those 'Big Coats' will be a flop... Mark my words...

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  • Bolland can make all the excuses he wants but they have still failed to get the clothing right. They spend too much time on worrying about market share and what their competitors are doing. Time to focus on what their customer wants - which is nice quality at reasonable prices. They are increasing their margin targets all the time and that only reduces the quality which ends up being reduced because no-one wants it. They seem to be costing for failure! NEXT are succeeding because they know their customer and cater for them accordingly with focused buying teams - and not layers of committees that still exist in M&S. Time for excuses is now over and there is an urgent need of a major management shake-up!! I have supplied M&S for 26 years and find their decline rather depressing and avoidable!!

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