Customer Behaviour

Profits at Marks and Spencer fell by almost two thirds to £176.4m last year following a costly business overhaul.

The retailer said that a decline in clothing sales and higher costs from opening new food stores were partly to blame for the 64% fall. Sales were flat at £10.6bn in the year to the end of March 2017.

Chief executive Steve Rowe revealed that like-for-like sales in his first full year in charge fell by 1.9% in the UK.

The slide followed a 5.9% fall in the three months to April.

The fact that Easter fell later this year hit the company hard, although Mr Rowe added that the fall was also partly due to a push for more clothes being sold at full price.


Clothing and home sales revenue still fell by 3.4%, although food performed better, falling just 2.1% in the fourth quarter.

Mr Rowe said the company remained “on track” with its turnaround plans announced last year, which include opening new food-only stores, selling clothing and homewares in fewer stores and cutting back on discounting.

“We are almost exactly where we thought we would be and we are pleased with what we delivered this year,” he said.

“As we have made improvements to our clothing and home product and proposition, our customers have noticed. We are starting to stabilise market share and importantly have seen full price market share growth, as we removed excessive discounting. In addition, our new food stores continue to exceed our expectations.”

The firm was hit by a number of sizeable one-off costs, including £156m to make changes to its pension scheme, £132m on international store closures, and another £49m on changes to its UK store estate and “onerous lease charges” related to that estate.

A further £44m was absorbed by M&S Bank being hit by charges incurred in relation to insurance mis-selling.

Excluding these one-off costs, profits were down just 10% to £613.8m.

Clothing division has been a perennial headache for M&S, with years of falling sales. Despite an unexpected rise in sales at Christmas, but it was business as usual in the three months to April.

The firm stressed that more items were being sold at full price, increasing its profit margin on each item.

Promotional days have been cut, both in store and online, including the scrapping of eight cyber events and ignoring Black Friday.

Mr Rowe said he now planned to improve 25% of non-food floor space this year.

He will hope to achieve the improvements with the help of his new head of non-food, Jill McDonald, who joins from Halfords later this year.

The company also said it had been listening to customers and would improve the product range in its smaller stores, focusing on more children’s clothing and homewares.


The food division performed better, with UK like-for-like sales down 0.8% for the year, including a 2.1% fall in the final quarter.

The decline was again mainly due to Easter falling later, and was not included in Wednesday’s results.

The company is pinning its hopes on expanding its food operation, including 68 new food-only stores opening in the last year, with 250 new sites by 2020.

M&S said the new Simply Food stores had outperformed their expectations, although the cost of new sites hit profits.

The new stores helped total food sales in the UK to rise 4.2% and Mr Rowe said he would now launch an online shopping trial in the Autumn. Online sales rose 4.9% for the year.

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