Marks & Spencer abandons plans for London Gateway distribution centre

The retailer revealed the change of heart alongside annual results showing a third year of profit decline, which will cost directors and staff their bonuses.

An overhaul of M&S’s supply chain is a key plank of chief executive Marc Bolland’s improvement strategy.

The London Gateway project, unveiled to great fanfare with Prime Minister David Cameron in attendance last year, was to be the retailer’s third big distribution centre as it remodelled logistics.

However, M&S decided not to proceed. Exact reasons were not revealed, but it is understood that problems such as planning consents threatened to delay the project.

Rather than allow its strategy to be delayed, M&S decided to modify its plans, which will also save it £130m.

M&S will now operate from its two new distribution centres – in Bradford, and a dedicated ecommerce centre in Castle Donington – and four regional distribution centres will be upgraded, all of which will create a so-called ‘single tier’ network by 2016/17.

M&S’s full-year pre-tax profit fell 3.9%. The retailer said it is now moving from a phase of “transformation” to “delivery” but warned that general merchandise sales had faltered in the new financial year. They have been impacted by the launch of the new Marksandspencer.com site, which is still being bedded in.

However, an improving trend in clothing sales in the fourth quarter, when the struggling category returned to growth, has continued in-store in the new financial year.

Last year underlying pre-tax profit was £623m on a 2.7% total sales rise to £10.3bn.

Like-for-likes edge up 0.2% in the year when a 1.4% general merchandise fall undermined a 1.7% rise in food sales.

Bolland said: “We are focused on improving our performance in general merchandise and were pleased to see early signs of improvement.

“Three years ago, we recognised the scale of investment required to transform our business, investing to strengthen our foundations and improve our customer offer. We are making solid progress on this journey and are now focused on delivery.”

Because of Marks & Spencer’s pre-tax profit performance, no executive or staff bonus will be paid for last year.