Marks & Spencer profits plunge amid store closure plan

M&S store closure costs result in 62% annual profit plunge

Britain's Marks & Spencer (MKS.L) said it needed to modernise urgently to survive after a second straight annual profit fall and a 321 million pound ($429 million) charge for a major store closure programme.

The chain revealed on Tuesday that it was putting thousands of jobs at risk through plans to extend its programme of store closures to 100 sites by 2022.

"Marks & Spencer has held a spot in the FTSE 100 since the index began in 1984".

Excluding the restructuring charge, the stores group's adjusted pre-tax profit was down 5.4% to £580.9mln from £613.8mln previous year, weighed by a 140 basis points drop in the food gross margin as a result of a weaker pound pushing up input cost inflation. It has also scaled back the number of Simply Food stores it planned to open this year by 15.

He added: "At our half-year results in November I outlined the need for accelerated change at M&S. The new organisation will largely be in place by July and the team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business", said Chief Executive Steve Rowe.

Rowe said it was targeting sustainable, profitable growth in three to five years time. This includes GBP321.1 million related to the United Kingdom store estate, up from GBP51.6 million the year before - as it accelerated "transformation plans" - with a GBP15.5 million cost related to its IT restructure.

However, the M&S boss highlighted that these changes come with costs, which were reflected in Wednesday's results.

That was ahead of analysts' average forecast of £573m but down from £613.8m made in 2016-17.

Turnover was broadly flat at 10.7 billion pounds, though the dividend was held at 18.7 pence.

Clothing & Home revenue fell 1.4 percent to 3,741.1 million pounds for the 52 weeks to March 31, 2018, with like-for-like revenue down 1.9 percent.

On an adjusted basis, with costs stripped out, pre-tax profit fell 5.4% to £580.9 million.

"The business.is starting to make decisions that have arguably been needed for many years", said Shore Capital analyst Clive Black, who has a "hold" stance on M&S.

M&S is not alone in finding the going tough.

Mothercare, well known for maternity and baby products, will be shuttering 50 stores, while youth fashion chain New Look is closing 60 outlets.

And Toys R Us, electricals group Maplin and drinks wholesaler Conviviality have all collapsed this year.

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