Marks and Spencer

LONDON — First-half profits at Marks & Spencer Group plc nearly doubled to 117.1 million pounds from 60.8 million pounds due to shrinking finance costs and taxes, while revenues dipped 2.1 percent to 4.86 billion pounds.

The company said revenue in the first six months to Sept. 28 was dented by weak clothing and home sales, due in part to supply chain issues, while the food division grew 0.9 percent underlying, driven by volume.

The company added that its acquisition of 50 percent of Ocado retail was a move aimed at catapulting the retailer into the online delivery world. The troubled clothing and home division also saw an improvement in sales performance in October.

M&S stock rose to 1.86 pounds in mid-morning trading.

Steve Rowe, chief executive officer of M&S, said the transformation of the retailer into a leaner, more nimble and profitable company “is now running at a pace and scale not seen before. For the first time, we are beginning to see the potential from the far-reaching changes we are making. 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.”

He said the clothing and home division was “making up for lost time. We are still in the early stages, but we are clear on the issues we need to fix and, after a challenging first half, we are seeing a positive response to this season’s contemporary styling and better value product.”

Rowe said the store had taken decisive action to improve availability and to shorten clearance periods. “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. Our cost reduction and store technology programs are on track.”

He added that the clothing business has an opportunity to reduce markdown “radically” and trade with a “first price, right price” approach.

He said taking up that opportunity would require a “fundamental rethink of the planning, flow, visibility and complexity of deliveries, which result in poor availability and excess stock and markdown. For instance, many store deliveries are picked in singles, adding cost and complexity to all parts of the supply chain. The supply chain program in clothing is working with the team to improve understanding and use of demand and fulfillment replenishment systems and better track stock from source to shelf.”

In July, as reported, the retailer let go Jill McDonald its boss for apparel and home, amid supply chain challenges, floundering sales, shrinking shop floors and customers looking to competitors for their seasonal fashion and basics. Rowe took over the leadership of the business directly in the near term.

In the food division, Rowe said early stage actions to drive value, broaden appeal and accelerate innovation had restored growth with total revenue up 1.2 percent in the first half, and like-for-like revenue up 0.9 percent. He said there was a marked improvement in the second quarter with volumes growing by 3.3 percent, ahead of the market.

M&S also confirmed that it had closed 17 full-line stores in the U.K., with cost savings of 75 million pounds delivered in the half. The company also slashed its net debt 3.7 percent to 4.13 billion pounds, largely due to cash generation.

While some improvement in trading is planned for the second half, market conditions remain challenging, the company said.

For the full year, Marks & Spencer said that in the clothing and home division net store closures will reduce sales by around 2 percent due to the timing of the closures. In the food division, M&S expects the sales contribution from space to be broadly flat.

U.K. operating costs will reduce by between 1 percent and 2 percent in the full year, while expectations for capital expenditure have been reduced to 300 million pounds to 350 million pounds.

In September, after months of hanging by its fingernails, M&S dropped out of the FTSE 100 index of blue chip stocks. The retailer, which saw its shares fall by 40 percent in the first eight months of the year, was dropped due to its shrinking market capitalization.

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