Profits up but M&S recovery falters

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The Independent Online

Marks & Spencer confirmed today that its share of the clothing market had shrunk after a recent faltering in the struggling retailer's sales recovery.

Although annual profits showed improvement, the bottom-line figure of £781.6 million was still well short of the £1.2 billion made in its heyday in 1998.

Today's results detail how an initial surge in the recovery of the clothing and food business earlier this year had proved short-lived, leading M&S to say it was not satisfied with its current sales progress.

The group's share of the clothing market declined by 0.2% to 11% despite increases in menswear, lingerie, women's casualwear and the new per una womenswear label.

Analyst Matthew McEachran of Investec Securities said that while clothing sales trends should reverse later this year, speculation that food sales were deteriorating further would give cause for concern.

Despite the fall, chief executive Roger Holmes said: "We remain confident that we have the potential not only to stabilise market share in clothing but to increase it."

Efforts by M&S to win back clothing sales have included new appointments, the introduction of per una - and most recently the teenage per una due range.

The group took on former Selfridges boss Vittorio Radice as executive director for general merchandising and later announced Asda's Kate Bostock as head of womenswear - the part of the business most under pressure.

Chief executive Roger Holmes said last month that the full impact of any new appointments was unlikely to be seen until next spring.

Pre-tax profits before exceptional items edged ahead 0.5% to £763 million in the 52 weeks to April 3. Before accounting for the extra week in the financial year, profits increased 6% to £805 million.

Outgoing chairman Luc Vandevelde described the performance as solid but added: "Clearly we are not satisfied with our sales progress."

The food department - seen as the backbone of the group's previous success - recorded a 1.6% increase in same-store sales during the year.

Market share in the food sector was maintained over the year, despite the company failing to react soon enough to the trend for low-carb products.

M&S said it would continue to cut down on costs in its clothing supply chain and would pass this on in the form of lower prices.

This would involve directly sourcing its products from the manufacturers, reducing the need for third-party suppliers. The group is currently in discussions with suppliers but would not elaborate on details.

A major launch this year will be the new Limited Collection, a range of formal clothing for women bridging the gap between formal and casual clothing.

The range is to be introduced into 66 stores from September and was described by Mr Holmes as the biggest launch since per una.

Mr Holmes gave no update on the group's search for a new chairman to replace Mr Vandevelde, although he added that some recent speculation about who would take over had been "wide of the mark".