M&S profits slump on store closure costs

M&S profits plunge 62pc amid sweeping store closure plans

But M&S's underlying profit was better than the £573mln market forecast, sending its shares 5.7% higher to 308.5p in afternoon trading.

However, the M&S boss highlighted that these changes come with costs, which were reflected in Wednesday's results.

Marks and Spencer-the British food-to-clothing retailer would be closing more than hundred "underperforming" United Kingdom stores in an ongoing reform, as was said on Tuesday.

The latest wave of closures will affect M&S clothing and home stores, which have underperformed for years.

Excluding the restructuring charge, the stores group's adjusted pre-tax profit was down 5.4% to £580.9mln from £613.8mln previous year, weighed by a 140 basis points drop in the food gross margin as a result of a weaker pound pushing up input cost inflation.

Revenue rose 0.7% to GBP10.70 billion for the year to March 31, up from GBP10.62 billion last year, but pretax profit dropped 62% to GBP66.8 million from GBP176.4 million.

M&S announced on Tuesday that it was accelerating its reorganisation with the closure of 100 United Kingdom stores by 2022.

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FTSE 100-listed Marks & Spencer PLC said on Wednesday that profit slumped in its recently ended financial year, as it works to rectify "a number of structural issues".

Food margins are expected to remain under pressure in fiscal year 2019, with the company predicting a decline of up to 50 basis points.

M&S highlighted the continued migration of shopping for clothing and home online, together with the development of global competition and discounters as threats to its business and market position, which led to the decision to accelerate its transformation plan to modernise its business. "Accelerated change is the only option". In addition, the group is set to close 25 percent of its Clothing & Home space to as sales shift online and investing to increase and improve its commerce capacity to support its aim to double its online sales to more than 33 percent.

Commenting on the results Laith Khalaf, senior analyst at Hargreaves Lansdown (Frankfurt: DMB.F - news), said M&S investors were essentially being asked to take a "leap of faith".

"And we're concentrating on tackling the culture of the business, making M&S a faster, lower cost and more commercial digital business".

"Alongside relocations, conversions, downsizes and the introduction of concessions, these closures will radically reshape M&S's clothing and home space", the firm said.

Rowe said it was targeting sustainable, profitable growth in three to five years time.

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