LONDON — First-half profits at Marks & Spencer plc rocketed 63 percent to 212.6 million pounds, or $369.1 million, from 130.4 million pounds, or $226.5 million.
The company said in a statement Tuesday that “improved customer perceptions” of its women’s wear range, and a focus on full-price sales in the 26 weeks to Oct. 1 helped reverse its downward profit spiral.
Sales, which rose 0.6 percent to 3.65 billion pounds, or $6.35 billion, from 3.63 billion pounds, or $6.32 billion pounds, are still struggling.
“We are pleased with the progress we are making, but much remains to be done,” said Stuart Rose, chairman of Marks & Spencer, who has been spearheading the turnaround at the British retailer since it became the target of a failed takeover attempt in 2004.
“Our focus on full-price, profitable sales, better buying, control of stock, commitments and costs has enabled us to deliver the targets we set out in July 2004,” Rose said.
M&S shares closed at 4.36 pounds, or $7.60, on Tuesday.
All figures have been converted at current exchange.
Although the increase in profits in the first half is partly due to cost-cutting measures, it is also due to the distinct absence of exceptional costs during the period. In the corresponding period last year, M&S registered exceptional costs of 81 million pounds, or $140.9 million, from the closure of Lifestore, its home interiors flagship; head office relocation and restructuring, and defense costs from the failed takeover attempt by Philip Green
The small rise in turnover was due to a 5.6 percent increase in own-brand food sales; a growing business in Ireland, and the performance of Kings supermarkets in the U.S.
The M&S statement pointed out that the U.K. trading environment remained difficult. U.K. sales in the first half dropped by 0.2 percent, due to poor performance in the first 12 weeks. However, sales did pick up later in the period, thanks mainly to a 0.2 percent rise in clothing sales in the second quarter.
“We took action on opening price points to restore our competitiveness,” Rose said, referring to the women’s wear range. “Our buying is now much more flexible, and the introduction of open-to-buy will mean more newness in stores. It will also improve our ability to chase trends at speed.”
Related Articles
You May Also Like
Richard Ratner, head of equities at Seymour Pierce in London, remained skeptical, however. In the past, he has said Rose’s achievements are the fruit of necessary — and obvious — cost-cutting measures, and that maintaining profit growth will be a challenge.
“Overall, it was a solid, but not unexpected, performance,” he said Tuesday. “Stuart Rose has done well, but given his savings and sourcing benefits, he was always going to produce a decent figure this year.”
On Tuesday, the company also announced that George Davies, the founder and designer of M&S’ successful Per Una clothing range, would become chairman of Per Una as of July 2006. The company bought Per Una from Davies for $22.8 million in 2004.
M&S announced the appointment of Steven Sharp, Rose’s longtime right-hand man, in charge of marketing, to the board. Sharp’s new title is executive director of marketing, e-commerce, store design and development. Sharp will be responsible for the delivery of the store modernization program and for the M&S Money relationship with HSBC.
Due to the company’s store modernization program, capital expenditure in the first half rose 44 percent to 171.2 million pounds, or $298.1 million, from 118.7 million pounds, or $206.7 million.