M&S 'takes action' after reporting fall in half-year profits
Marks & Spencer today said it was taking “decisive action” to remedy the costly mistakes that left it nursing a 10% drop in half-year profits.
The high street bellwether reported pre-tax profits of £290 million in the six months to September 29, down from £321 million a year ago as it paid the price for failing to stock-up on best-selling womenswear ranges earlier in the year.
M&S said there were better signs in the run up to Christmas, with like-for-like non-food sales falling by a better-than-feared 1.8% in the second quarter - a marked improvement on the 6.8% slide seen in the first three months, which was its worst performance for more than three years.
The group said it was taking bolder moves to back key fashion trends, which was already paying off as it sold 44,000 military coats in the half-year.
It has also overhauled its general merchandise team and hired new managers, including drafting in former Debenhams and Jaeger boss Belinda Earl to revitalise womenswear in the newly-created role of style director.
But under-pressure chief executive Marc Bolland warned recent trading had been "volatile" and the second half of the year would be tough as retailers up the ante with promotions.
He added that customers would only fully start to see the benefits of its management reshuffle after next year's spring and summer ranges, which have already been chosen by the previous team.
Shares in the group rose nearly 2% as the figures came in slightly above expectations in the City.
Analysts at Singer Capital Markets said today's figures suggested M&S was beginning to turn the corner: "M&S has been dogged by ranging and buying issues over the last few quarters, part of which may have stemmed from management uncertainties and today's update suggests they are taking control in this regard after securing a new team."
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said while the group was showing "promising signs" from its revival efforts, its recent management changes were also "disruptive".
On an underlying basis, profits fell to £297 million from £307 million a year earlier.
Total like-for-like sales were down 1.4% over the first half as the non-food decline offset a better performance in its food division, which saw sales rise by 1.6% on a like-for-like basis in the second quarter.
Mr Bolland said while the Queen's Diamond Jubilee and Olympics had failed to drive higher sales, the nation's mood had improved after the summer's events, which he hopes will continue in the run-up to Christmas.
The group suffered in the first quarter amid wet weather and a shortage of some of its most popular lines.
Its dire non-food performance in the first quarter led to the departure of previous head of general merchandise Kate Bostock, who was replaced by former M&S food boss John Dixon.
The company announced a further reshuffle yesterday as Annette Browne, former womenswear trading director stepped down from her role with immediate effect, while lingerie and beauty head Frances Russell was promoted to womenswear director.
Janie Schaffer - former Victoria's Secret chief creative officer - was appointed as its new director of lingerie and beauty.
M&S is 18 months into a three year turnaround plan being led by Mr Bolland, who is putting online and so-called multi-channel sales at the heart of the business.
It recently opened a new state-of-the-art flagship store at Cheshire Oaks in Ellesmere Port, with free customer wi-fi access, browse and order points, 70-inch television screens showing the latest styles, assistants with iPads and a brand new beauty department.
M&S said online sales rose 22% in the second quarter as Marks continued to invest in its "our shop your way" service and the group said it now had 1,500 tablet computers in its stores to help customers.
International sales rose 3.6% over the half-year with currency effects stripped out, according to the group.
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