Marks & Spencer said on Wednesday it urgently had to modernise or risk fading away as it reported a second straight decline in annual profit and booked a £321 million charge for a store closure programme.
The 134-year-old M&S faces unrelenting competition from supermarkets, fashion chains like Zara, H&M and Primark, as well as online giant Amazon.
In addition, efforts to revitalise its business are being hampered by ongoing pressure on UK consumers' spending power.
M&S reset its strategy in November, two months after retail veteran Archie Norman joined as chairman, detailing a five-year programme of store closures and relocations, and moves to make its misfiring food business more competitive.
“At our half year results in November I outlined the need for accelerated change at M&S," said Steve Rowe, Marks & Spencer chief executive. "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."
Store Closures
On Tuesday M&S said it would close 100 UK stores by 2022, further accelerating the plan as it strives to make at least a third of sales online.
M&S, one of the best known names in British retail, said it made a pretax profit before one-off items of £580.9 million pounds in the year to March 31.
That was ahead of analysts' average forecast of £573 million but down from £613.8 million made in 2016-17.
After taking account of adjusted items of £514.1 million, including the charge relating to store closures, pretax profit was £66.8 million, a 62 percent fall.
Turnover was broadly flat at £10.7 billion.
Structural Issues
“There are a number of structural issues to address and we are taking steps towards fixing these," 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 M&S have fallen 26 percent over the last year and the firm is in danger of being booted out of the prestigious FTSE 100 index.
The stock closed Tuesday at 292 pence, valuing the business at £4.7 billion.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
