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.
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.”