M&S fall in profit shows trouble on the high street

M&S has defended its commitment to investing in offering value and its brands despite reporting a fall in profit and its first drop in second quarter sales for two years.

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Profit before tax fell 8% to £320.5m for the six months to the 1 October, down from 348.6m the previous year.

Group sales fell 0.7% on a like for like basis in the three months to 1 October, including a 2.5% fall in general merchandise and clothing and a 1% rise in food sales.

Sales in the half year increased 0.5% including a 2.1% increase in food sales and a 1.3% decline in general merchandise and clothing sales.

The retailer claims to be “performing well” in a challenging environment and says its decision not to pass on the full extent of commodity price rises hit profits. It also claims to have maintained its market share (11.5%) in clothing despite the drop in sales.

International sales increased 9% while sales on M&S Direct increased 11.7% during the six month period.

The results come as the latest figures from the British Retail Consortium show that high street sales are “worryingly weak as Christmas nears”.

Marc Bolland, M&S CEO says: “In an increasingly promotional environment, we managed costs tightly and took a decision to invest in giving our customers better value, choosing not to pass on the full extent of the increases in commodity prices.

“Against a challenging consumer backdrop, we took decisive action to manage the business through the short term while continuing our focus on investing in creating a stronger platform for future growth.”

M&S is one year in to Marc Bolland’s three year plan to overhaul its brand portfolio, stores and food division to become a “truly international, multi-channel retailer” and says it has “made strong progress” against those medium and long term objectives.

During the period, M&S launched its Only at M&S brand, relaunched its clothing sub-brands with advertising campaigns for individual brands for the first time, and boosted its homeware offering with the introduction of designer collections by Conran and Marcel Wanders.

It has also added 900 new food lines and made efforts to raise customers’ awareness of innovation in food through advertising, promotions and in-store cafés and is trialling a “more inspiring shopping environment” in 15 pilot stores to boost performance.

Bolland remains cautions for the six months ahead but adds that M&S’s Christmas offering includes more innovation and choice than ever before.

According to the BRC UK sales values were 0.6% lower on a like-for-like basis than in October 2010, when sales had risen 0.8%. Total sales were up only 1.5% compared to a 2.4% increase in the previous year.

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