M&S profits fall 17% as fashion sales struggle
Written by Hannah McGrath
Pre-tax profits at Marks & Spencer have plunged 17.1 per cent in the first half of the year, as the High Street stalwart continues to battle declining sales in its clothing and home divisions.
The retailer reported that a ‘challenging’ first half had seen clothing and home revenue down 7.8 per cent, with like-for-like revenue down 5.5 per cent, beside a 17.1 per cent - or £176.5 million - overall drop in profit before tax on sales of £4.9 billion.
The continued roll out of the company’s transformation plan saw costs savings of £75 million in the first six months of 2019, with 17 full-line stores closed, as part of the reshaping of the UK store estate.
The company said that online revenue increased by just 0.2 per cent over the period, which was ‘less than planned’, due to issues with availability and product mix in a slower online market.
However, traffic to the website grew by eight per cent, which the company attributed to strong growth in mobile traffic and paid search as the company steps up its £25 million digital transformation programme.
As part of efforts to boost digital sales, M&S is also trialling 11pm cut-off for free next day to store delivery along with enhanced search and personalisation.
Last month M&S upgraded its payment options by partnering Clearpay to offer payment instalments for online customers.
Steve Rowe, chief executive, said: “In a declining market, the business underperformed. There were availability challenges across both sales channels, as a result of supply chain issues and a shape of buy that remained too broad.”
Rowe admitted that in the embattled clothing and home division, the company was still “making up for lost time” while the cost reduction and store technology programmes are on track.
“We are still in the early stages, but we are clear on the issues we need to fix and, after a challenging first half, we are seeing a positive response to this season’s contemporary styling and better value product,” he said.
“We are in the first stage of our transformation programme to create a profitable, growing family of businesses under the M&S brand, bound together by a common consumer brand and integrated stores, employment values, technology and customer data.”
Rowe highlighted that M&S was looking to transform its business during a “period of profound change in both main businesses and in our organisation and culture” and set out a path forward for the company’s digital first strategy to help reach the goal of one third of UK sales online, including plans to build a leading customer database combined with a relaunched loyalty offer and a planned relaunch of the Sparks scheme in 2020.
In addition, the company’s new digital group is currently engaged in building capabilities in areas such as data science, while also connecting disparate data sources and making them available in the cloud, Rowe said.