Marks and Spencer profits fall as clothing disappoints

Marks & Spencer
Image caption M&S's clothing division has been struggling in recent years.

Marks and Spencer has reported a big fall in profits, despite rising sales across the group.

Pre-tax profits fell to £564.3m, down from £658m last year, despite group sales rising 1.3% to £10bn for the year to 30 March.

While underlying sales of food rose 1.7%, sales of general merchandise - which includes clothing - fell 4.1% in the year.

Chief executive Marc Bolland described the market as "challenging".

M&S's clothing division, which has an 11% market share in the UK, has been struggling in recent years as sales have fallen.

In April, director of lingerie and beauty Janie Schaffer, who joined M&S from lingerie chain Victoria's Secret, left after just three months in the job.

In an effort to address its problems, M&S last year changed its retail team, bringing in Belinda Earl, a former chief executive of both Debenhams and Jaeger, as head of style. Last week it launched a new autumn/winter clothing collection, which it hopes will win back disaffected customers.

'Improve quality'

Speaking to BBC Radio 4's Today programme, Mr Bolland said: "We won't duck the fact that we feel we have underperformed in general merchandise.

"We have to improve on quality", he added.

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Media captionM&S chief executive Marc Bolland: "We have underperformed"

Mr Bolland also defended the company's tax affairs in the wake of controversy over tax avoidance schemes.

There was "nothing fiscal" in the company's use of Ireland as a trading hub for its international e-commerce business, he said, as the country now handles more than 50% of online trade.

"M&S pays UK corporation tax on all the profits generated by UK sales", he said. "We contributed £800m to the UK tax authorities in 2011-12 - the 25th highest tax contributor in the UK."

He maintained that M&S paid more corporation tax than many other FTSE 100 companies of bigger size.

The company also said it had appointed Patrick Bousquet-Chavanne - currently M&S's corporate director of strategy implementation and business development - as its new marketing director. He will succeed Steven Sharp in July.

M&S said Mr Sharp had "played a significant role in shaping the M&S brand from the introduction of the 'Your M&S' branding in 2004 to numerous iconic advertising campaigns reinforcing M&S's quality, style and ethical credentials".

'Too risk averse'

M&S said that its international sales had risen by 4.5% over the past year.

Multi-channel sales, which include internet shopping, rose by 16.6% and now account for 13% of general merchandise sales.

About 3.6 million people visit the website each week, the company said, while in-store pick-up of online orders was proving increasingly popular.

Retail analysts Conlumino said that although international and online sales were growing, M&S needed to "focus firmly" on its UK business.

"On this 'home front' advancement is a little less encouraging and, in clothing at least, has seemed more like a gentle evolution than a radical reinvention," Conlumino said.

"We still believe M&S is nowhere near ambitious enough on the general merchandise front; in our view the company is too risk averse and is unwilling to break the mould of its traditional ways of doing business."

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