M&S’ Marc Bolland faces pressure after 5.8% slump

High street stalwart Marks & Spencer has reported a 5.8 per cent fall in annual profits and insisted it was making progress in turning around its clothing operation.

Marc Bolland: Faces pressure after profit dip. Picture: Getty

Marks & Spencer has seen its annual profits plunge to their lowest in four years, tightening the screw on chief executive Marc Bolland.

Sales of general merchandise, dominated by womens’ clothing, fell for the seventh consecutive quarter, piling more pressure on its newly-launched autumn/winter collection to turn around its fortunes.

Underlying pre-tax profits fell 3 per cent to £665.2m from £687.2m last time, but analysts were encouraged that the figures were not as bad as expected and the shares were marked 27.4p or 6.2 per cent higher to close at 467.9p.

Group sales edged up 1.3 per cent to £10 billion as M&S drove expansion online and overseas.

Bolland said the performance of clothing was unsatisfactory and he would not sweep the problem “under the table”. M&S’s food performance was much better, with same-floorspace sales up 1.7 per cent.

Analysts said the poor performance of M&S’s general merchandise made the success of the just-released fashions pivotal, both for the retailer and Bolland’s tenure at the helm.

However, the M&S chief played down the threat, against the backcloth of a shake-up of senior staff, including executive marketing director Steven Sharp announcing yesterday he will step down from the board at the July AGM.

Bolland claimed the M&S spring/summer collection now being created for 2014 was also important, adding that the group’s transformation after years of “under-investment in infrastructure” was a gradual process and “timeframes are irrelevant”.

The retailer is spending about £2.4bn over the coming years on store revamps, logistics, IT and systems, as well as selective investment overseas,

M&S’s international sales in the latest year rose 4.5 per cent, with double-digit sales growth in the likes of Shanghai, India and the Gulf states offset by continued tough trading in austerity-hit countries like Ireland and Greece.

Online, which now accounts for 13 per cent of general merchandise sales, saw revenues jump 16.6 per cent. The full-year dividend is pegged at 17p, via a 10.8p recommended final payment.

Bolland, hired three years ago on a multi-million pound contract to revitalise M&S, gave investors some encouragement by slashing capital spending from £775 million to £550m that could boost cash flow and open the way for higher dividends and a shares buyback.

He dismissed suggestions that some investors would want him to quit if he had not delivered in 12 months’ time, saying such timesframes were “irrelevant”.

He said: “We are going to make it happen. It is a very difficult task but we are working hard at it.”

Bolland refused to comment on reports that he could miss out on a substantial chunk of a £2m bonus pot because of the profits figures – or on the question of whether he would give back the bonus.

Jean Roche, a retail analyst at Panmure Gordon, said: “Lower capex guidance for 2013-14 onwards...could mean improved dividends, share buybacks or even a one-off payout.”

M&S’s shares have risen about 30 per cent over the past year amid periodic bouts of bid speculation.