Marks & Spencer Profits Dropped, as Clothing Sales Fell

AAATrade
AAATrade
Nov 7 · 2 min read

On Wednesday, Marks & Spencer announced a 17% drop in pre-tax profits, falling to £176.5m, while the company’s revenue decreased by 2.1% to £4.86bn.

The main decline was in clothing sales. Shares also dropped by 36%, compared to last year. As a result, Marks and Spencer lost its position in the FTSE 100 index.

However, the stock increased by 5.7% yesterday morning after Marks & Spencer said that it has an improvement trading plan for the second half. Marks and Spencer said that it will close weaker stores and it will invest online.

Even though the profit decreased, Chief Executive Steve Rowe remained positive.

“Our transformation plan is now running at a pace and scale not seen before at Marks & Spencer. For the first time, we are beginning to see the potential from the far-reaching changes we are making.”

“In clothing and home, we are making up for a lost time. We are still in the early stages, but we are clear on the issues we need to fix.”

During the first half, clothing and home sales dropped 5.5%, while food sales rose by 0.9% in the same period. Marks and Spencer mentioned that the market conditions are still challenging.

Marks and Spencer recently made a $1.93 billion deal with the online grocer Ocado. “The food business is outperforming the market. Our deal to create a joint venture with Ocado is complete and plans to transition to the M&S range are on track,” Rowe said.

Rowe said that Marks and Spencer made some improvements in style and the value of clothing. “In some instances, dramatic sales uplifts in categories where we have restored value, style and availability illustrate the latent potential and enduring broad appeal of our brand,” he said.

However, some analysts continue to have doubts. RBC analysts said, “We think M&S has lost like-for-like market share in clothing and home and the problems with this business look to be deep-seated, with most of the solutions being things M&S has tried in the past”.

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Last updated: 07 November 2019.

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