Poor results at M&S raises fears for rest of high street
Marks & Spencer's latest profits slump - fuelled by poor clothing sales - could be an omen of "more bad news to come" for struggling high street retailers, one Northern Ireland expert has said.
The retail giant, which has 20 stores in Northern Ireland including eight Simply Food outlets, 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 £176.4m for the year to April 17.
"The latest financial results from Marks & Spencer are, in my opinion, a portent of more bad news to come from struggling high street retailers," according to retail analyst Donald McFetridge.
"The principal reason why I believe this to be the case is that retailers are having to cope with increasing price competition in a very volatile market which is reliant on consumer confidence to part with their cash at the tills."
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.
However, shares in M&S leapt to their highest level for nearly a year, up 2% on signs that the turnaround is gathering pace.
Marks & Spencer chief executive Steve 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."
Mr McFetridge said: "On top of this, Marks & Spencer, and others, are having to cope with a very unstable economic outlook as Brexit looms and, in particular, the fall in the value of sterling which is pushing up the price of food and clothing in the context of squeezed consumer incomes.
"General merchandise, and clothing in particular, has long been a thorn in the flesh for Marks & Spencer, and it's one which continues to cause them problems.
"It strikes me that Marks & Spencer is focusing on a strategy which is costing them, not only a lot of money, but it's also costing them customers who are still looking for bargains. Marks & Spencer needs to recognise that, while they are still regarded as one of the paragons of retail excellence on the high street, today's consumers are reluctant to pay full price for anything if they can find a way not to."
And he said the chain needs to "trim" the number of stores it operates in Northern Ireland and throughout the UK.
Underlying pre-tax profits were 10.3% lower at £613.8m 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.