M&S continues to report sales decline in the first half

Marks and Spencer Plc (M&S) group revenue decreased by 3 percent at constant currency to 4,967 million pounds (5,689 million dollars) in the first half of this fiscal year, which the company said was adversely impacted by Easter timing by an estimated 0.8 percent in Food and 0.2 percent in Clothing & Home and the group’s accelerated UK store closures. The company said, profit before tax & adjusting items was 223.5 million pounds (293.4 million dollars), up 2 percent on last year benefiting from lower first half costs. Basic earnings per share increased by 3.8 percent to 5.4p, due to the increase in profit year-on-year, while adjusted basic earnings per share decreased by 0.9 percent to 10.6p.

Commenting on the half year trading update, Steve Rowe, the company’s Chief Executive said in a statement: “Against the background of profound structural change in our industry, we are leaving no stone unturned and reshaping our business, its organisation and culture. We are on track to restructure our store portfolio with over 100 full-line closures and expect to see newly remodelled stores open next year. We are fixing the basics of our online channel and there are very early signs of improvement.“

Highlights of Marks & Spencer’s first half

M&S added that UK Clothing & Home revenue decreased by 2.7 percent as the company closed 21 full-line stores and three outlets, while like-for-like revenue decreased 1.1 percent. Gross margin was down 20bps at 58.1 percent, while buying margin was up 30bps. Clothing & Home online revenue rose 9.1 percent and total M&S.com revenue increased 5.6 percent at constant currency, which the company said, was adversely impacted by the planned change to food offer and by the closure of website in China.

International revenue decreased 18.4 percent at constant currency, as a result of the closure of stores in loss making exit markets and the sale of its operations in Hong Kong to the franchise partner in December 2017. Excluding these effects, revenue at constant currency increased 1.6 percent. Growth in franchise revenue was driven by the further expansion of food business, particularly in France. The decline in revenue in owned retained markets, reflected difficult trading in the Republic of Ireland which was largely offset by continued growth in India and other company-owned retained markets.

M&S has announced an interim dividend of 6.8p, which will be paid on January 11, 2019 to shareholders on the register of members as at close of business on November 16, 2018. The company expects Clothing & Home space to decrease by 4 percent compared to previous estimate of 5 percent at year-end and capital expenditure to be between 300-350 million pounds compared to previous estimate of 350-400 million pounds before disposals.

Photos: International M&S, courtesy of M&S