It’s not just a price cut, it’s an M&S price cut admits Bolland

MARKS & Spencer yesterday admitted it had been drawn into the price wars stalking Britain’s battered high street as the retail icon suffered the first setback to profitability in two years.

M&S chief executive Marc Bolland revealed that underlying interim pre‑tax profits had slipped 6 per cent to £315.2 million and the company had reacted to the tough conditions by focusing on special offers. Promotional pricing covered 25 per cent of its clothing and homewares range – an unusually high percentage for the high street bellwether.

“That [percentage] is very high for us,” said Bolland, who succeeded Sir Stuart Rose as chief executive last year.

However, the M&S boss argued that its own figure compared with research showing that in the retail market as a whole, an average 35 per cent of merchandise was on promotion in the 12 weeks to the end of September.

He claimed M&S was still being selective in its own special offers but warned that he saw little early respite from the difficult climate.

“I don’t think it’s going to go away. We expect the promotion pressures to continue for the second half,” he added.

M&S’s interim like‑for‑like UK sales, excluding VAT, rose 0.5 per cent, comprising a 1.3 per cent fall in general merchandise, covering clothes and homewares, and a 2.1 per cent rise in food.

The company’s profits setback came as budget fashion clothing chain Primark disclosed that its annual profit had slipped 8 per cent to £309m as competitive pressures had seen its profit margins slide from 12.5 to 10.2 per cent.

International sales at M&S rose 9 per cent, with a strong performance in Turkey, Russia and the Middle East offset by difficult trading in the Republic of Ireland and Greece – both of which have received taxpayer bailouts.

Bolland said the group continued to work on its relatively fledgling internet operation, with M&S Direct sales up 11.7 per cent over the first half, and site visits running at three million a week.

Despite the price promotions, M&S continued to bolster its upmarket credentials, Bolland said. From next spring the chain will feature “Savile Row Inspired” – though not handmade – suits from famous tailor Richard James, retailing for a few hundred pounds. Bolland said such suits would have the cachet to help the company crack important markets such as Singapore, Dubai and Russia.

The company repeated that its strategy under Bolland was to “transform M&S into an international, multi‑channel retailer and reduce our dependency on the UK economic cycle”.

M&S has pegged the dividend at 6.2p. Its shares closed down 0.77 per cent, or 2.5p, at 323.5p.

Charles Stanley analyst Sam Hart suggested M&S’s customer base, with a “bias towards older and more prosperous socio-demographic groups”, would stand it in good stead to weather the tough economic conditions.