Marks & Spencer general merchandise sales hit by web launch as profits dip

The retailer flagged that general merchandise performance has been impacted in its current quarter by the launch of its new M&S.com site. It said the site will take four to six months to “settle in”.

However, Marks & Spencer said the improving trend in clothing sales in the fourth quarter, where the struggling category returned to growth, has continued in its stores while its food business continues to outperform the market.

For its full year to March 29, underlying pre-tax profit hit £623m against a 2.7% total sales rise to £10.3bn.

Like-for-likes edge up 0.2% in its year to March 29 with a 1.4% general merchandise fall bringing down a 1.7% rise in food sales.

M&S chief executive Marc Bolland said: “We are focused on improving our performance in general merchandise and were pleased to see early signs of improvement. Our food business had a very strong year, consistently outperforming the market.

“Three years ago, we recognised the scale of investment required to transform our business, investing to strengthen our foundations and improve our customer offer. We are making solid progress on this journey and are now focused on delivery.”

M&S chairman Robert Swannell said: “The investment made in executing our strategy over the last three years puts M&S in a stronger position to compete in a retail world undergoing profound change. Our priorities now are to deliver on the investment we have made and to make M&S a more profitable, stronger and well-equipped business.”

International sales rose 6.2% over the year with “strong growth” in India and its flagship Chinese stores. M&S said that trading in the Republic of Ireland continued to be difficult but performance in its European business improved and it took full control of its Czech and Eastern European business.

Meanwhile, multichannel revenue jumped 22.8%.

Total UK gross margin was down 20bps at 40.6%. General merchandise gross margin was down 110 basis points at 50.7% due to increased markdowns while food gross margin rose 80 basis points.

M&S expects its gross margin to improve around 100 basis points in general merchandise as a result of sourcing benefits while food margin will rise between 10 basis points and 30 basis points due to operational efficiency.

The retailer said it will lower its capital expenditure to £500m from £550m for the next three years. M&S expects to add about 1% to its UK space in its current year, with all growth coming from food. It will add 10% to its international space.