Company of the week

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The Independent Online
MARKS AND SPENCER reported its first profit decline in seven years and warned that earnings will deteriorate as waning consumer spending erodes sales at Britain's largest clothing retailer.

Its shares fell 10 per cent, to 404p, on the news. Chairman Sir Richard Greenbury said he doesn't expect an improvement in the second half after a 44 per cent fall in first-half profit to pounds 180.5m from pounds 321.4m.

"What is interesting is the unremittingly gloomy tone not just in the UK but everywhere they are operating," said William Cullum, an analyst at Paribas Capital Markets, who is cutting his full-year earnings forecast by 8 per cent. "We won't see much growth" next year.

Marks has suffered from an industry-wide slowdown as job cuts and talk of a global recession deterred spending. Like food retailers Tesco, Sainsbury's and Safeway, Marks has moved into financial services to seek growth. That division, where pre-tax profit rose 19.7 per cent, was the only one to report higher earnings.

Marks' shares have dropped 29 per cent in the past six months, compared with a 16 per cent decline in general retail stocks as investors realise it is not immune to the problems other retailers face.

"We all thought sales would recover in September and October," Sir Richard said. "In fact they've gone further south. It's a blood bath out there on the clothing side." Marks' first-half profit was also eroded by the cost of store acquisitions from Littlewoods, a new till system and a mail- order venture.

Marks has pared pounds 300m from a pounds 2.2bn, three-year investment programme to increase sales space, and will further scale back investment after 2000. The programme will hamper earnings by pounds 90m in the current year, Sir Richard said. The retailer plans to cut costs, cut prices in its stores this year and next and negotiate better terms from its suppliers. Copyright: IOS & Bloomberg

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