Marks & Spencer sales hit by transformation effort

Marks & Spencer reported same-store sales declines in both its clothing and food divisions amid disruption caused by its radical restructuring programme, and warned that it expects “little improvement in sales trajectory” for the remainder of the year.

Clothing sales were down 1.1 per cent on a like-for-like basis in the company’s first half, with food sales falling 2.9 per cent on the same basis. Chief executive Steve Rowe said that this phase of restructuring “is about rebuilding the foundations of the future M&S and we are judging progress as much by the pace of change as the trading outcomes.”

The company said clothing sales were also affected by weakness in certain lines such as children’s daywear and women’s tops, while food sales were impacted by a switch away from promotions and towards “everyday value.”

Profits were also constrained by the upheaval, with a further £96.8m of exceptional charges booked, including £47m related to UK store closures. Pretax profit before adjusting for one-time items was up 2 per cent to £223.5m while the interim dividend was unchanged.

At its full-year results in May, the group booked over £320m in store closure costs and said it expected another £150m of charges as the programme completed, virtually wiping out full-year statutory profit. It increased its target for store closures from 60 to 100, and slowed the rate of expansion in its Simply Food convenience chain. Managers missed out on bonuses amid weak trading.

Mr Rowe became chief executive in 2016, with Archie Norman replacing Robert Swannell as chairman late last year. Since then, the pace of change has accelerated, with multiple management changes across the home, food and banking operations.

The company has repeatedly warned its investors that there will be more tough decisions ahead, telling them at this year’s annual meeting that it will close more stores “that do not make any money and that are uninvestable.”

However, it is faring better than its two main mid-market rivals. Debenhams is haggling with its landlords over its long and restrictive lease, and its shares have fallen by four-fifths over the past year to just 9p. House of Fraser was bought out of administration by Sports Direct.

Analysts are expecting full-year profits at M&S of around £545m, a number that is expected to change little in the following two years. The shares have fallen 8 per cent in the past year, while a market value of £4.8bn leaves the company towards the bottom of the FTSE100 index.