M&S boss 'enjoying' turnaround
Marks & Spencer's boss Marc Bolland said he was "tremendously enjoying" its growth today as the retailer posted its first annual profits increase in four years.
The chief executive, who has been under sustained pressure in recent years with the retailer suffering sliding clothing sales, signalled he had no intention of leaving and that tough decisions to invest in the company were paying off.
Underlying profits for the year to March 28 rose 6.1% to £661.2 million, beating City expectations, and one analyst said Marks was now taking "considerable strides" towards the days when its annual earnings were £1 billion.
Mr Bolland took over at M&S in 2010 and last year notched up an unwelcome hat-trick of falling annual profits.
Under his leadership, Marks has poured billions of pounds of investment into the business to try to turn around its fortunes, while clearing out its top fashion team, and recruiting celebrities for high-profile marketing campaigns.
Yet sales at the beleaguered general merchandise division, which includes clothing, continued to crumble - with 14 quarters in a row of like-for-like declines until a 0.7% lift in the most recent period.
M&S said GM sales for the 2014/15 financial year, which saw a like-for-like decline of 3.1%, missed expectations. But after the upturn in the final quarter it is now looking ahead to a period of "modest sales growth".
Items such as a much-talked about 1970s-style suede skirt worn by TV presenter and model Alexa Chung have helped improve the image of Marks's clothing range.
M&S pinned the blame for its disappointing clothing sales performance for the year partly on the autumn weather - which it said was the third warmest on record - hitting sales of coats and knitwear.
There was also disruption at its online distribution centre over the peak Christmas period but the group said there had been good progress since then, with M&S.com sales back in growth in the fourth quarter.
The group's food division had an "outstanding" year, posting 0.6% like-for-like sales growth despite the pressures facing the wider grocery sector where prices are falling under pressure from discounters Aldi and Lidl.
Profit margins were boosted by better sourcing and a drive to hold off on price reductions in general merchandise, and efficiencies in the food unit. M&S also kept a lid on costs and capital spending - lower after years of infrastructure investment.
M&S said the food market would remain "challenging" but said it was "well positioned with a differentiated product offer" and looking ahead it expected "strong sales growth".
Mr Bolland said: "We are transforming M&S into a stronger, more agile business - putting the right infrastructure, capabilities and talent in place to drive our strategic priorities."
He brushed off suggestions that he might now choose to leave the company on a high, saying that he "absolutely" expected to remain in place at the time of next year's annual results.
"I am tremendously enjoying the fact that we are growing. I am totally here for the business. This phase, of execution, is something I am enjoying."
Mr Bolland implied that the figures were a vindication of his strategy in recent years, saying M&S would already have increased annual profits were it not for the decisions on making investments that it needed.
He said: "We have chosen to do this the hard way. We have chosen to do the right investments."
Mr Bolland remained cautious on prospects, adding: "This is a tough market, and I expect it to remain tough for the next year."
M&S hiked its final dividend by 7.4% to 11.6p meaning the full-year dividend was up 5.9% to 18p. Meanwhile the group said it expected to return £150 million of cash to investors through a share buy-back programme.
Shore Capital analyst Clive Black upgraded his rating on the stock to buy.
He said: "Marc Bolland took tough decisions when he joined the company, deciding to engage in further heavy capital expenditure, particularly upon the groups infrastructure, much to the market's chagrin.
"With GM now positive and, we believe, set to remain so for much if not all of FY2016, more exciting times could be ahead for shareholders."
He said the prospect of pre-tax profits topping £1 billion, as seen in the 2007/8 financial year, would not arrive "anytime soon".
"However, it is not beyond reason to assert that with sustained revenue growth in GM, with progress on progress in food and some tailwind in international markets, that M&S could make considerable strides to this figure and quickly," Mr Black added.
Shares, which have risen by a fifth since the start of the year on improving sentiment about the business, rose by 1% today.