Norman vows to transform ‘wobbly’ M&S: Battle to grow online as profits drop 10% with 120 shops closing down
Man on a mission: M&S chairman Chairman Archie Norman
Marks and Spencer bosses have pledged to rescue the ‘wobbly’ business as profits fell for the third consecutive year.
The 139-year-old High Street stalwart unveiled a 10 per cent drop in annual profits to £523million after it took a hit from store closures and restructuring costs.
M&S is in the middle of an extensive shake-up as it battles against the slump that has hit Britain’s high streets.
The company had already said at least 100 of its joint clothing and food stores would shut by 2022, but the latest figures add up to around 120 closures by 2024.
It closed 35 last year and will axe a further 85, along with 25 Simply Food shops.
Chairman Archie Norman, who joined in 2017, said: ‘It’s a bit like an egg and spoon race.
‘The more you run, the more it wobbles, and it’s been wobbling quite a lot at the moment.’
Chief executive Steve Rowe said: ‘M&S is changing faster than at any time in my career – substantial changes across the business to our processes, ranges and operations, and this has constrained this year’s performance, particularly in clothing and home.
However, we remain on track with our transformation and are well on the road to making M&S special again.’
Shares fell 9.4 per cent, or 25.4p, yesterday to 245.8p in a sign that investors are less than convinced.
Marks and Spencer unveiled a 10% drop in annual profits to £523m after it took a hit from store closures and restructuring costs
The stock is now down 55 per cent in the past four years. The company took a £439million hit from one-off costs – partly related to store closures – in the year to March 31.
M&S has not decided which shops will go next. It also plans to open 75 bigger stores that will be more family-friendly, for example, with car parks, and is refreshing its products to gain traction online, where it trails many retailers.
Retailer to raise £600m
A rights issue to raise £601million will fund a tie-up with online grocer Ocado.
For every five shares they own, current M&S investors can buy one more.
Each is priced at 185p, much less than last night’s closing price of 245.8p.
M&S is issuing 325m ordinary shares, about 20 per cent of its share capital.
There are 150,000 retail investors with shares in their own name and 150,000 have stock through online trading platforms.
It has teamed up with delivery service Ocado to make its food available over the internet for the first time.
The 50/50 joint venture will cost it £750million, and yesterday the retailer launched a £601million fundraising, offering discounted shares to existing investors.
This rights issue has been underwritten by lenders including Morgan Stanley, so even if M&S shareholders do not want to get on board, it will still be able to raise the money.
Despite these changes, Norman and Rowe said that they are not trying to rival one of the Big Four supermarkets. Norman said: ‘We are a weekend shop rather than a weekly shop.’
M&S said online sales in the UK of its clothing and homeware rose 9.8 per cent last year, outstripping the rest of the market.
This means investment in jazzing up its website, such as making its web pages the fastest-loading of all UK clothing stores, and campaigns featuring TV star Holly Willou-ghby are paying off, bosses said.
Total clothing sales fell 1.6 per cent in stores open more than a year, and were not helped in the fourth quarter when it quickly sold out of the most popular styles.
Food sales fell 2.3 per cent, partly due to a late Easter which fell outside the financial year, meaning the figures do not reflect spending over this busy shopping period. Total revenue fell 3 per cent to £10.4billion.
Neil Wilson, of trading firm Markets, said: ‘It’s better than standing still but no silver bullet. Exposure to the UK high street is a major drag that won’t get easier.’