M&S profits slump as cost of store closures bites
Marks & Spencer has seen full-year profits collapse as the high street giant counts the cost of a brutal store closure plan.
The retailer reported a 62.1 per cent fall in pre-tax profit to £66.8 million in the year to March 31 as it was dragged down by £321.1 million in costs linked to store closures.
The results come a day after M&S said it will shut more than 100 outlets by 2022 as it accelerates a transformation programme that will see thousands of jobs put at risk.
Its branch in Walsall is among those facing closure, with the potential loss of up to 94 jobs.
Chief executive Steve Rowe said the "need for change is urgent".
He added: "At our half-year results in November I outlined the need for accelerated change at M&S.
"The first phase of our transformation plan, restoring the basics, is now well under way and the actions taken have increased the velocity of change running through our business.
"These changes come with short-term costs which are reflected in today's results."
The retailer's troubled clothing arm saw like-for-like sales fall by 1.9 per cent in the year. Comparable food sales were down 0.3 per cent. Revenue nudged up 0.7 per cent to £10.7 billion.
On an adjusted basis, with costs stripped out, pre-tax profit fell 5.4 per cent to £580.9 million.
M&S has been a high street fixture for generations – the Walsall branch opened in June 1934, while the department store on Wolverhampton's Dudley Street dates back to the 1920s.
M&S also has traditional food and clothing stores in Stafford Riverside, Kidderminster and two sites at Merry Hill. It also has food-only stores in Cannock and on the Hilton M6 service station, as well as outlet stores at Astle West in West Bromwich and at Perry Barr. It also runs small Simply Food outlets at BP service stations at Foley in Walsall and on the Hagley Road in Stourbridge.
The latest wave of closures will affect M&S clothing and home stores, which have underperformed for years.
M&S earmarked 14 stores for closure on Tuesday with a total of 872 employees affected.
The move is part of a five-year turnaround plan spearheaded by chairman Archie Norman and Mr Rowe.
They have been seeking to save costs through store closures and shutting distribution centres as part of a wide-ranging efficiency drive as the company's financial performance deteriorates.
"There are a number of structural issues to address and we are taking steps towards fixing these," Mr Rowe added.
"The new organisation will largely be in place by July and the team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business.
"This is vital as we start to leverage the strength of the M&S brand and values across a family of businesses to deliver sustainable, profitable growth in three to five years."
Shares in the company were up over five per cent following the results, but experts warned that M&S could drop out of the FTSE 100.
"M&S is currently teetering on the edge of relegation from the FTSE 100 in the quarterly reshuffle next week," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
"Marks & Spencer has held a spot in the FTSE 100 since the index began in 1984.
"If M&S is ejected from the FTSE 100 it would be a hugely symbolic moment, made more poignant by the fact that Ocado looks likely to enter the blue chip index. It paints a picture of the old economy and the new, passing each other in very different directions."