Marks & Spencer posted a full-year pre-tax profit fall of 3.9% this morning. Retail Week highlights what the analysts say about today’s update.
“We found these 2013/14 results disappointing. Overall numbers were slightly ahead of market consensus at £623m underlying profit (consensus £615m), but we expected firmer indications on capital repatriation, a better General Merchandise gross margin recovery than now indicated and we note the comments on online “settling” in the early year. The positive comments on clothing sales are understandable in the context of clothing-friendly weather. The comments on Online are worrying as we understand that the declines here have been material and we are not sure that this is just a natural settling down process or something more. We expect that the market needs to be re-assured that numbers will start to hold on a sustained basis before it buys into this story.” Tony Shiret, Espirito Santo
“If the past few years have been about anything to go by, there has been a serious attempt to propel M&S back up the mountain, mostly by investing in better kit. Things that were holding the company back – like a dated website, poor inventory management and inadequate e-commerce logistics – have been invested in and brought up to date. However, now that this investment has been made it is time to start climbing. While it is early days, the latest results show that progress is still slow with UK sales advancing only thanks to food and profits dipping despite some intake margin gains across a number of product areas. In a sense, this picture demonstrates that there is still further work to do and that work is mostly around fashion product. It is notable, for example, that gross margins on clothing were down thanks to greater levels of promotion – suggesting that a number of lines were misaligned with what consumers wanted and needed to be discounted in order to sell through. The grain of sand in M&S’s shoe is a continued lack of vision and ambition on clothing and, in particular on womenswear. Until it is removed, once and for all, M&S’s advances will be limited.” Neil Saunders, Conlumino
“Following this update, we are slightly reducing our FY15 pre-tax profit forecasts of £690m to £680m. We continue to believe it will take a number of seasons before the existing team is able to manifest a marked improvement in performance in womenswear. There has, we believe, been an improvement in the showcase autumn/winter ranges but the branding and the demographic and age profile of its target customer remains unclear. The initiatives relating to the supply chain and IT address under investment from the past and bring the infrastructure up to the standards of international peers but will not, we believe, lead to a significant increase in profits over the medium term.” Freddie George, Cantor
“The 100 bonus point gross margin recovery forecast for General Merchandise is solid, reflecting the improved sourcing skills in Clothing, but the forecast of 4% overall cost growth may be a bit higher than some had hoped. In 2014/15, the market is banking on Food continuing to do well, but the swing factor has to be General Merchandise if the much-mooted overall profit recovery is to materialise this year. It is therefore reassuring that the new-year has started quite well for Clothing in the stores, no doubt helped by the generally warmer weather, but it sounds like the much-vaunted new website has teething problems as M&S have warned that Online performance will hold back overall General Merchandise sales in Q1.” Nick Bubb, Retail Analyst