WEATHER SLAMS MARKS & SPENCER PROFITS
Byline: James Fallon
LONDON — Marks & Spencer isn’t being helped by the weather.
The struggling U.K. retailer warned Monday that unseasonably warm temperatures in the first two weeks of September hit sales of its fall-winter collections and that its pretax profits for the first half of its current year will be about half those of the previous year.
The company said in a statement that its overall sales were down 6 percent in the first half, which ended Saturday, and 7.8 percent on a same-store basis. Sales of clothing and home furnishings were down 11.7 percent on a same-store basis and 9.7 percent overall, while food sales dropped 1.5 percent on a same-store basis and 0.3 percent overall.
The results for September have a “disproportionate” effect on the first six months, Marks & Spencer said. It now expects its profits before tax and exceptional items for the first half to be in the range of $303.8 million to $320.2 million. This compares with analysts’ expectations of about $361.3 million and pretax profits of $466.7 million in the corresponding period a year earlier.
Dollar figures are translated from the English pound at current exchange.
A Marks & Spencer spokesman said apparel sales fell across the board, although sales have picked up in the last 10 days as the weather has become more seasonal.
“Every retailer has been hit by the warm weather in early September,” he said. “But we have not changed our original marketing plan, we are taking no price-cutting action and we are still quietly confident about the fall season. We believe there is still everything to play for, especially because the Christmas trading period accounts for 40 percent of our profits for the year.”
Marks & Spencer’s shares rose 24.2 cents to close Monday on the London Stock Exchange at $5.19. The shares rose because most British retail analysts had already factored in a profits decline in the first half following reports last week in the British press of poor sales of Marks & Spencer’s fall-winter collections because of the warm weather.
The warning from Marks & Spencer comes as the retailer is undergoing a major revamp following disappointing profits and sales last year. Under its new chief executive Peter Salsbury, Marks & Spencer has rejiggered its management, altered its buying practices, closed its money-losing Canadian operation and announced plans to sell its Kings Super Markets chain in the U.S. It also has reiterated its plans to expand Brooks Bros., both in the U.S. and overseas.
Its most recent senior management recruit was a new marketing director, Alan McWalter, whose appointment was announced last week. McWalter, 46, will join Marks & Spencer on Jan. 1, 2000. He has held a series of positions at Kingfisher PLC since 1991 and currently is marketing director of its Woolworths division.
McWalter’s appointment has led to speculation that Marks & Spencer might again reshuffle its management to speed its decision-making. The Marks & Spencer spokesman declined to comment, but sources said a reshuffle is likely although no time frame has been set. The changes could see the departure of Lord Andrew Stone, currently joint managing director of the company’s U.K. retailing operations, and perhaps that of Guy McCracken, joint managing director of its overseas businesses, including Brooks Bros.
The statement from Marks & Spencer came on the same day that Storehouse PLC, owner of the Bhs department store chain and of specialty retailer Mothercare, said that it is likely to go into the red in its first half ending Oct. 2. Storehouse has been without a chief executive since Ken Edelman resigned in May. It said it expects its first-half losses to be about $24.6 million to $32.8 million because of high investment and poor sales. This compares with pretax profits of $63.6 million a year earlier.