Marks & Spencer admits overhaul 'came with a cost'
Retail giant Marks & Spencer admitted its overhaul has "come with a cost" as annual profits tumbled by nearly two thirds and clothing sales plunged back into reverse.
The high street bellwether posted a 64% plunge in pre-tax profits to £176.4 million for the year to April 17.
Sales in the group's embattled clothing and home arm dropped 5.9% in the last three months, marking an abrupt end to the revival seen in the previous quarter, when sales rose for the first time in nearly two years.
Described by experts as "sobering", the fall was compounded by the timing of Easter and its December sale, which wiped around 3.8% off clothing and home sales and around 1.9% off food sales.
This left like-for-like sales in its food halls 2.1% lower in the quarter.
But shares in M&S leapt to their highest level for nearly a year, up 2% on signs that the turnaround is gathering pace.
Mr Rowe said the group has stabilised its market share in clothing since the start of 2017, while action to cut clearance promotions has helped full-price sales surge by 11% in the second half of its financial year.
He said: "We achieved a huge amount in the year and whilst there is still much to do, I am pleased with our progress and we remain on track.
" As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits."
"Looking ahead, we will continue our programme of self-help in a tough trading environment," he added.
Underlying pre-tax profits were 10.3% lower at £613.8 million in the year to April 17.
The profits plunge comes after Mr Rowe has invested heavily in slashing prices and revamping clothing ranges to win back customers.
Its bottom line results were also hit by the cost of a store closure programme, its move to pull out of 10 international markets and the decision to shut its defined benefit staff pension scheme to future accrual.
M&S said it plans to cut store space devoted to clothing and home products by around 1% to 2% and revamp around 25% of its non-food shop space in the current financial year, while growing its Simply Food chain by around 90 new stores.
But the cost of its turnaround will continue to weigh on results, the group warned, particularly in the first half of the new financial year.
Rising buying costs from the Brexit-hit pound will also add to pressures, while Mr Rowe warned consumer spending on clothing was "extremely volatile at the moment and slightly depressed".
This comes amid a squeeze on household budgets f rom surging inflation , while clothing retailers have also been impacted by a shift in spending towards leisure and eating out.
Retail analysts at Shore Capital said while the fourth quarter performance was "sobering", they added Mr Rowe has "done much" in the first year of his overhaul.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "The new strategy at Marks & Spencer is much needed, and may eventually pay off, but it's not going to be an easy ride."
M&S has recently poached the chief executive of Halfords - Jill McDonald - as managing director for clothing, home and beauty to lead the turnaround in the division.
It has also named well-respected former Asda boss Archie Norman as its new chairman from September 1, to succeed Robert Swannell, who is retiring after six years in the role.