LONDON — Extraordinary charges linked to a major real estate refurbishment plan and store closures outside the U.K. dented Marks & Spencer’s pre-tax profits in the first half, which fell 22.7 percent to 216 million pounds, or $330.5 million.
All figures have been calculated at average exchange rates for the six months to Sept. 26.
Underlying profit before tax, however, was up 6.1 percent to 284 million pounds, or $434.5 million, on the back of a modest gain in group sales. Revenue edged up 1 percent to 4.95 billion pounds, or $7.57 billion, on a reported basis and 1.4 percent at constant currency.
The food division was a strong performer, as was the retailer’s Web site, while general merchandise continued to struggle.
“We delivered good underlying profit growth in the first half and made strong progress against our key priorities,” said chief executive officer Marc Bolland. “Our food business again outperformed the market by over 3 percentage points, as our focus on quality and innovation continues to set us apart. In general merchandise, we decided to improve profitability by focusing on gross margin, delivering another significant increase, which in part resulted in slightly lower sales.”
Once again, the company blamed the weather for disappointing general merchandise sales, and mainly the clothing collections. It pointed to unseasonal conditions, together with its decision to focus on full price sales and discount less in the second quarter.
Sales in the general merchandise division were 0.4 percent lower year-on-year, and 1.2 percent lower on a like-for-like basis. M&S.com sales were up 34.2 percent, with growth across all key metrics, the retailer said.
International sales were down 0.9 percent on a constant currency basis, with performance “significantly impacted” by the decline of the euro against the pound. “The challenging macro-economic conditions, particularly in our Middle East region, continued to affect the performance of our franchise business,” the statement added.
Marks & Spencer’s bottom line suffered from extraordinary charges including a 90 million pounds, or $139 million, multiyear plan to improve the quality of the store estate, which began in the half; a 22 million pounds, or $34 million, charge relating both to the impairment of assets in underperforming stores in Western Europe, and closure costs from exiting some countries in the Balkans region.
The company plans to update on third-quarter sales on Jan. 7.