Food, fashion fatten M&S profit

A customer browses the food section at a Marks & Spencer store in London. Bloomberg News

Marks & Spencer Group Plc, the United Kingdom's biggest clothing retailer, said annual profit rose 25 percent to the highest in more than a decade after it remodeled stores and added outlets to bolster sales of food and women's fashions.

Net income climbed to 821.7 million pounds, or 48.7 pence a share, in the year ended March 31, from 659.9 million pounds, or 38.5 pence, in the prior 12 months, the company said yesterday. Profit included a one-time pension gain of 95 million pounds.

Business in the first seven weeks of the new fiscal year has been "mixed" with sales showing a "marked improvement" this month after a "difficult" April, Chief Executive Officer Stuart Rose said. The London-based retailer has redesigned about three-quarters of its outlets to win market share as increased living costs erode consumer spending.

"The business is on a much sounder footing these days, but M&S needs to show it can re-establish its premium trading performance, albeit within an increasingly difficult market," analyst Matthew Taylor at UBS AG in London said in a May 16 research note. UBS has a "neutral" rating on the stock.

Sales at stores open at least a year fell 1.7 percent in the last quarter of the fiscal year, the second straight decline after two-and-a-half years of growth, Marks & Spencer said. Competitor Next Plc this month reported an 8.9 percent drop in first-quarter same-store sales.

Total sales

Revenue from general merchandise, which includes garments and home furnishings, declined 3.1 percent at stores open at least a year in the fourth quarter.

Marks & Spencer rose 2 pence, or 0.5 percent, to 417 pence in London trading on Monday. The stock has slid 44 percent since rising to a record high of 749 pence in May last year.

British retail sales of clothes, shoes and textiles fell 0.1 percent in March from a year earlier, the first annual decline since 1998. A gauge of UK consumer sentiment fell last month to the lowest in more than 15 years, GfK NOP Ltd said on April 30.

Financial pressure on consumers is "set to continue", Next said this month. The Bank of England has cut its main interest rate three times since December to stave off a recession.

Chairman's role

Rose, 59, was appointed to the role of CEO in 2004 to fend off a takeover plan by billionaire Philip Green. He revived the company with redesigned women's wear and stepped-up advertisements featuring model Twiggy and pop group Take That.

Marks said in March that Rose will become executive chairman in June, attracting criticism from some investors, who said the roles of chairman and CEO should be kept separate. The extension of Rose's role until 2011 will give him enough time to determine a succession plan, and the company will then return to a separation of the jobs, the retailer has said.

Marks & Spencer, which has more than 600 UK stores, had remodeled about 70 percent of its outlets by Christmas. The retailer plans to get as much as a fifth of sales from overseas in the next five years, up from about 8 percent now, by investing in developing markets such as in Eastern Europe.

Agencies

(China Daily 05/21/2008 page21)