Marks & Spencer unveils plan to kickstart recovery as profits slide

MARKS & SPENCER yesterday unveiled a fresh package of measures to help kickstart a recovery as it reported a near halving of interim profits and a gloomy trading update, which prompted a fresh round of full- year profit downgrades in the City. There is even speculation that M&S may have to cut its dividend, which is no longer covered by earnings.

Peter Salsbury, the chief executive, said the current performance of the business was unacceptable. "We've got to move faster to catch up and get ahead," he said.

M&S stores will accept third-party credit cards from next April in a move which follows a similar decision announced by John Lewis two months ago.

M&S said it would need to increase sales by around 3 per cent to cover the associated costs, which include fees to the credit card companies and the impact on M&S's existing charge card operation.

Its sourcing policy will be overhauled to increase efficiencies and cut costs by pounds 450m within three years. This will involve increasing the proportion of goods sourced from overseas suppliers from the current 50 per cent to the high street average of 70 per cent.

Key manufacturing hubs will be established in Sri Lanka, Portugal, Morocco, the Far East and Middle East. Supply links with William Baird and Daks Simpson in the UK have already been severed and more cuts are expected.

M&S is also planning to raise pounds 400m from the sale and securitisation of non-trading properties. This will include the sale of the Gyle shopping centre near Edinburgh and the possible securitisation of the lease on its Baker Street headquarters. No sales of store freeholds are planned at present, though they have not been ruled out.

M&S needs to raise the funds to boost cash flow and help support the dividend payments. The interim dividend of 3.7p is not covered by interim earnings of just 2.1p. M&S would not comment on whether the final dividend payment would be cut.

The comments accompanied a dreadful set of interim figures which saw half-year profits fall from pounds 337m to pounds 193m if exceptional items are excluded. UK profits fell from pounds 261m to pounds 145m and the businesses in Europe, America and the Far East all recorded losses.

UK clothing sales were down by 12 per cent on an underlying basis on the same period last year. In October, sales of general merchandise were down by 0.4 per cent on last year on a like-for-like basis. Food sales were up by 0.9 per cent.

SG Securities cut its full-year profit forecast to pounds 525m and put a new 250p price target on the shares. The stock closed 5p lower at 278p yesterday. Nick Bubb, SG Securities' retail analyst, said: "They are running hard to stand still."

There was no update on the search for a new chairman to replace Sir Richard Greenbury. Recent speculation has suggested that, contrary to earlier expectations, M&S is looking to appoint a full-time executive chairman.

Mr Salsbury said M&S would need to improve its prices to compete with the new wave of discounters such as Matalan and Peacocks, which have grabbed market share at the value end of the sector. He admitted that M&S's UK clothing market share had fallen by 1.5 to 2 per cent in the past year.

Start your day with The Independent, sign up for daily news emails
News
Legendary blues and rock singer Joe Cocker has died of lung cancer, his management team as confirmed. He was 70
people70-year-old was most famous for 'You are So Beautiful'
News
people
Sport
Chelsea manager Jose Mourinho
footballLatest score and Twitter updates
Arts and Entertainment
David Hasselhof in Peter Pan
The US stars who've taken to UK panto, from Hasselhoff to Hall
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
News
newsIt was due to be auctioned off for charity
Life and Style
A still from a scene cut from The Interview showing North Korean leader Kim Jong-un's death.
tech
Environment
Sir David Attenborough
environment... as well as a plant and a spider
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'