Marks & Spencer braced for drop in profits

 

Marks & Spencer boss Marc Bolland is set to come under
increased pressure from investors tomorrow as the retail chain unveils
its first fall in annual profits for three years.

Despite efforts to pull in customers with celebrity-laden advertising campaigns, featuring the likes of actresses Joanna Lumley and Rosie Huntington-Whiteley and actor Ryan Reynolds, sales of general merchandise have fallen in the last year.

Mr Bolland, who is reportedly set to pocket a combined pay package of around £6 million this year, has been told by analysts that sales targets he set in November 2010 may be too ambitious.

The squeeze on household incomes in the UK, where M&S has 700 stores, is likely to take some of the blame for the weaker performance, but a failure to keep up with its rivals in clothing, such as Next and Primark, is also at the root of its problems.

Nick Bubb, independent retail analyst, said: "In all, he has not delivered the sales he needs with his three-year target. The focus is on whether he will admit that the year has started badly."

The group is forecast to report a 3% fall in pre-tax profits to £694 million in the year to the end of March, while sales are likely to be around £9.9 billion.

Mr Bolland is expected to step back from his goal to boost sales to between £11.2 billion and £12.2 billion by 2014 as the economic headwinds show no sign of abating.

But the share price at 339p is 10% higher than it was at the start of the year and while like-for-like sales of general merchandise are expected to have fallen by about 1.7% in the period, food sales have put in a much stronger performance.

Clive Black, an analyst at Shore Capital, said: "Against this somewhat gloomy backdrop and current situation we believe that M&S has toughed it out reasonably well.

"Whilst trading momentum for 2011/12 was far from stellar, the business performed robustly in clothing and general merchandising, given market conditions, while the food business did well to outperform a tough sector."

The group has said its prospects look brighter as the Diamond Jubilee, Euro 2012 football championships and Olympics will play into its hands by giving cause for celebration over the summer.

It has also seen encouraging demand for new lines from model Twiggy and those seen in a new advert featuring singer and model Myleene Klass and former X-factor judge Dannii Minogue in which Gary Barlow sings the Beatles classic Here Comes The Sun.

However, there are fears the wet weather in April and early May will have hit Marks' recent trading, adding to the pressure on the company from the squeeze in consumer spending.

PA

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