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Shares of Marks & Spencer (M&S) are down following the release of its full year results today (20th May).

Group sales at were up, however, underlying pre-tax profit declined compared to the same period last year. 

While the decline came in better than market expectations, it marked a third consecutive year of profit declines for the company, despite efforts to turn things around.


Published 20/05/2014

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M&S released its full year results today (20th May). For the fifty-two weeks ended 29th March, M&S took revenue of £10.3bn, representing a 2.7% increase over the prior year.

Underlying pre-tax profit came in £623m, which marked a 3.9% decline over the previous year, but, coming in above market expectations.

By region, total UK sales were up 2.3%, with like-for-like UK sales up just 0.2% in the period.
International sales for the period performed well, showing an increase of 6.2% (on a constant currency basis). That’s thanks in part to strong performance in India and China.

By business, like-for-like general merchandise sales were down 1.4%, though overall sales were flat versus last year. The company points to a challenging clothing market, together with unseasonal conditions and high levels of promotional activity.

Meanwhile, the company’s food business continues to perform well, with like-for-like food sales growing 1.7% and overall food sales increasing by 4.2% in the period.

Looking ahead, the company expects to reduce capital expenditure (capex) to between £500m and £550m in the next three year, compared with capex of £710m this year, and, deliver “a significant improvement” in general merchandise gross margins, as a result of operational improvements.

Shares of retailer are down 2.7% at time of writing, on the back of this latest update.

While the company has made progress, of particular disappointment is that it has reached the end of its three-year turnaround plan, without significant traction in terms of boosting profitability (or even meeting revenue targets set at the time).

That’s aside from the company stating that it’d take four to six months for its new website (which it claims offers improved search functionality, among other benefits) to “settle”.
That’s expected to have an impact on general merchandise performance in the first quarter, which certainly doesn’t bode well for the company.

That said, it’s clear that the company has laid down the ground work for growth revival in the long-term, but, bolder strides may be needed - its turnaround isn’t over just yet.