Marks & Spencer’s profits dip as food sales fall

Marks & Spencer took a hit to its like-for-like food sales and profits last year

Marks & Spencer’s (M&S’s) £312.4M fall in profits in the year ending April 1 2017 exceeded market expectations, according to market analysts, as like-for-like food sales for the retailer fell.

While foods sales were up 4.2% compared with last year, driven by the retailer opening 68 Simply Food stores, like-for-like sales fell by 0.8%.

The retailer experienced its biggest drop in sales in the fourth quarter of the financial year, falling 2.1%.

The retailer claimed the timing of its December sale and Easter occurring outside of the financial year had hit sales.

Results were better than expected

Economist Intelligence Unit analyst Jon Copestake said M&S’s results were better than expected, but the decline in like-for-like food sales should not be attributed to the timing of Easter.

“With food sales, which have traditionally offset clothing declines, also falling it is difficult to see how Mr Rowe [M&S ceo Steve Rowe] can say that he is ‘pleased’ with the progress made.”

M&S’s profit before tax dropped 63.9% to £176.4M from £488.8M in the previous year. Profit after tax fell 71.4% to £115.7M.

Spending on new food stores and the restructuring of the business – including changes to pay and pensions – ate into profits, costing the company £437.4M. Profit before tax and adjusted items fell 11% to £613.8M.

Basic earnings per share fell 71.1% to 7.2p from 24.9p, while ordinary dividend per share stayed the same at 18.7p.

On track to grow its food business

The M&S ceo said the company was on track to grow its food business, but there was still more to do.

“As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits, but the business is still strongly cash generative and we reduced our net debt.

“Looking ahead, we will continue our programme of self-help in a tough trading environment. We remain committed to delivering for our customers and shareholders as we build sustainable foundations for the future.”

Meanwhile, M&S set out plans this month to trial its own online food shopping service, as it prepares to compete with the industry’s leading online food retailers.


Analyst comment – Clive Black, Shore Capital

Shore capital analyst Clive Black also said M&S’s results exceeded expectations.

Black said “M&S has delivered FY2017 profit results that are ahead of consensus and Shore Capital’s forecasts.

“M&S is a medium to long-term change story with no quick fixes, as befits such organisations. At first base Mr Rowe has done much, with points for encouragement therein.

“Taking into account management’s headline guidance for FY2018, our indicative feel for the stock is to retain a hold stance, whereas we had harboured a hope to be more positive, in truth.”

Related News

Marks and Spencer's food like-for-like sales dropped 0.1%

M&S Food sales drop is ‘concerning’: analyst

M&S will open 200 new food stores by the end of 2019

M&S to open 200 food stores after clothing sales fall

Icelandic Seachill is cutting jobs after losing a contract to supply M&S with seafood

Icelandic Seachill to make 86 redundancies after M&S contract loss

Chemical contamination fears sparked a recall of M&S soup

M&S soup recalled over chemical contamination

Marks & Spencer is to trial an online food service this autumn

Marks & Spencer to test online food service

M&S plans to cut 525 head office jobs

Marks & Spencer to slash over 500 head office jobs

Marks & Spencer have slammed unauthorised third party retailers who sell their products

Marks & Spencer slams unofficial third-party sellers

2 Sisters has invested £10M in its south Wales ready meals site

2 Sisters invests £10M in ready meals factory

Submit a comment

Your comment has been saved

Post a comment

Please note that any information that you supply is protected by our Privacy and Cookie Policy. Access to all documents and request for further information are available to all users at no costs, In order to provide you with this free service, William Reed Business Media SAS does share your information with companies that have content on this site. When you access a document or request further information from this site, your information maybe shared with the owners of that document or information.