LONDON — Marks and Spencer Group plc reported a 38.2 percent fall in net profits for the year ended March 28, to 506.8 million pounds, or $871.6 million, from 821 million pounds, or $1.41 billion, during the same period in the prior year.
“Last year was a tough and very volatile year for us,” said Sir Stuart Rose, executive chairman of M&S, during a results presentation Tuesday. “If you’re the largest clothing retailer in the country and the clothing market is slowing down, it’s quite difficult not to be affected.”
The company said investing in promotions and markdowns to lure cautious customers had hit its margins.
Revenues for the year inched up 0.4 percent to 9.06 billion pounds, or $15.58 billion, while U.K. sales fell 1.7 percent to 8.16 billion pounds, or $14.03 billion, which M&S said reflected “the deterioration in market conditions and consumer spending.” Dollar figures have been calculated at average exchange rates for the period.
Clothing sales in the U.K. fell 4.1 percent during the year, while same-store sales of general merchandise — which includes clothing — fell 6.9 percent. However, M&S said it had retained its market share in clothing and remains Britain’s largest clothing retailer by value and volume. “Retail is a cyclical business and there is no doubt that the current market environment has been one of the toughest for a very long time,” Rose stated.
International sales were a brighter spot for the retailer, rising 25.9 percent during the period to 897.8 million pounds, or $1.54 billion.
In response to the results, Rose cut M&S’s dividend by 33 percent, to 15 pence, or 23 cents, a share. M&S also said it plans to further reduce capital expenditure during the 2009-10 fiscal year to around 400 million pounds, or $688 million, from 652 million pounds, or $1.12 billion, in the last fiscal year. The company said it would shift the focus of its spending from its property portfolio to its information technology and supply chain infrastructure.
Rose said he remains “cautious” about the trading outlook for the rest of the current fiscal year. “The good news is it hasn’t got any worse,’ said Rose, referring to market conditions.
M&S’s share price closed down 8.1 percent at 311.7 pence, or $4.83, a share on the London Stock Exchange Tuesday.
Following the results, Rose also unveiled a program “to speed up the changes that we have been making in the business,” which will include driving international growth and reinvigorating brand communication. Called “2020 — Doing the Right Thing,” the program will be headed by Ian Dyson, group finance and operations director. The company also said Tuesday Carl Leaver, director of international, home and M&S Direct, will leave the company after a change in the structure of the general merchandise business. M&S hasn’t yet named a new international director to succeed Leaver.