LONDON — In a year of cost-cutting and restructuring, especially in its clothing and home division, Marks and Spencer Group saw year-end profits dive 71.4 percent to 115.7 million pounds, or $151.6 million.
Sales were up 2.2 percent to 10.62 billion pounds, or $13.91 billion, driven mainly by the food division, whose revenue rose 4.2 percent. The company said the clothing and home branch’s gross margin was up 105 basis points, with full-price sales growth of 2.7 percent. As expected, revenue in that division declined 2.8 percent due to planned reduction in promotions and clearance sales.
Dollar figures have been calculated at average exchange rates for the periods to which they refer.
The cost of exiting 10 loss-making international markets, shuttering stores and reducing retail space in the U.K. also took a bite out of M&S’s bottom line as it seeks to become a leaner, more efficient and food-focused company.
“Last year, we outlined a comprehensive plan to build strong foundations for the future. We said we would recover and grow clothing and home, continue with our plans for food growth, remove costs and simplify the business,” said Steve Rowe, the chief executive officer of M&S.
“As we have made improvements to our clothing and home product and proposition, our customers have noticed; we are starting to stabilize market share and importantly have seen full-price market share growth, as we removed excessive discounting. In addition, our new food stores continue to exceed our expectations,” he added.
Rowe said the planned restructuring has impacted profits, but the business remains strongly cash-generative and net debt has been reduced. “Looking ahead, we will continue our program of self-help in a tough trading environment,” he said. “We remain committed to delivering for our customers and shareholders as we build sustainable foundations for the future.”
The company said it is maintaining a total dividend per share at 18.7 pence, or 24 cents, the same level as last year, taking into account the strong cash generation of the business.
Looking to the current year, M&S said it is expecting a space decline of 1 to 2 percent in clothing and home, while it is planning for “better buying” and a further reduction in discounting.
In food, the company plans to open 90 Simply Food stores in the U.K. Capital expenditure for fiscal 2017-’18 is expected to be about 400 million pounds, or $519 million.