British retailer Marks & Spencer profits saw a 2% boost in the first half of 2018, but sales of clothing and food declined.
M&S said on Wednesday it made a profit before tax & adjusted items of £223.5m in the six months to 29 September compared to £219.1m last year.
Like-for-like sales for clothing & home fell 1.1%, while like-for-like sales for food were down 2.9%. Total like-for-like UK sales were down 2.2%.
M&S said trading conditions ‘remain challenging’ as the retailer faces competition from the growth of online retailers, but the group’s full-year outlook was broadly unchanged.
M&S chief executive Steve Rowe said: “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. Every aspect of our ranges, how we trade, our supply chain and marketing is undergoing scrutiny and change.”
M&S launched a turnaround plan last November. The group’s latest five-year programme includes store closures and relocations that aim to cut excess selling space in its clothing business, and increased technology investment that aims to make the food business more competitive.
The retailer is targeting 100 UK store closures by 2022, with a possibility of more closures as it is looking to manage its property estate more pro-actively.
GlobalData’s retail analyst Thomas Brereton said: ‘‘A 7.1% rise in pre-tax profit – created through the unapologetic elimination of unprofitable stores and product lines – has not been enough to negate the negative figures and its share price fell 4% in early morning trading.”
“While it is still undergoing ‘profound structural change’, following the announcement in May of plans to shutter 100 full-line stores by 2022, its speed of transformation continues to lag behind the speed of change in consumer behaviour.
“M&S is no longer able to prop up its wilting clothing & home division with good performances in its food business; a marginal decrease in food revenue (-0.2%) is deceiving due to 22 new food-store openings, as the l-f-l sales fall of -2.9% reveals a much deeper problem in retaining customers as other grocers continue to lure shoppers through prices. Clothing & home revenue fell 2.7% (l-f-l sales down 1.1%) as 21 full-line stores and three outlets closed in H1, with a complete overhaul in its buy-side still underway, shifting towards a greater focus on ‘Must-Have’ essentials.”
Brereton believes that the £47.6m the retailer spent on store closures shows its commitment to rapid change.
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He added: “Changes over the last few years are beginning to bear fruit, with M&S embracing the online channel quicker than many of its competitors – 20.4% of UK Clothing and Home revenue is now online.”
“But while Rowe’s plan of leaving ‘no stone unturned’ in the pursuit of revamping all M&S divisions is the right one, it remains to be seen if investors – and shoppers – will afford him the time required to make the much-needed changes.”