M&S announces first fall in profits for three years

Marks & Spencer yesterday posted its first fall in full-year profits for three years, as the squeeze on consumer spending took its toll on the retail giant.

Its chief executive, Marc Bolland, came under further pressure as he added that the almost incessant downpours in April led to a "tough" start to this financial year.

Alongside the first drop in profits at the high street stalwart since 2009, the 128-year-old retailer was forced to downgrade its target to grow sales by up to £2.5bn by 2014 because of a deterioration in the UK economy.

Further disappointment for its army of private shareholders came when it announced a flat dividend.

Mr Bolland, who took the helm in May 2010, said M&S and other retailers had found that the almost unending rainfall over the past six weeks hit footfall.

The British Retail Consortium has blamed the weather for a 12.6 per cent fall in the numbers of high street shoppers for April.

M&S, which has more than 730 stores in this country and 387 overseas, posted a 1 per cent drop in underlying pre-tax profits to £705.9m for the year to 31 March, on group sales up 2 per cent to £9.9bn. The dip in profits means its 78,000 employees will get a smaller bonus this year.

Mr Bolland said that the company had "performed well in a challenging economic environment" but underlying UK sales at the retailer rose by just 0.3 per cent.

While its food business grew, general merchandise business, which is dominated by clothing, suffered a 1.8 per cent slip in UK like-for-like sales.

Its non-food margins tumbled by 0.8 per cent, as it was forced to slash prices to combat fierce discounting by rivals.

Neil Saunders, managing director at Conlumino, said of M&S's womenswear that "in-store ranging and merchandising is both confusing and, all too often, uninspiring".

M&S's UK food division delivered underlying sales up by 2.1 per cent, boosted by 1900 new lines.