Marks & Spencer has delivered its first increase in profits since 2011, thanks to a tight rein on capital spending, less discounting and better deals with suppliers.
The high street retailer said it would return £150m to shareholders via a share buyback, after underlying profit before tax rose 6.1% to £661.2m in the year to 28 March.
Sales rose just 0.4% to £10.3bn after another difficult year for M&S clothing, offset by a 3.4% rise in food sales. Clothing and homewares sales fell 2.5% over the year. Underlying sales only began to rise in the final quarter of the financial year after four years without growth.
Mark Bolland, the chief executive, said the company’s food business had enjoyed an “outstanding year in a difficult market” and that its clothing and homewares division had been able to significantly increase its profit margins despite a sales performance “below our expectations.”
“We are transforming M&S into a stronger, more agile business – putting the right infrastructure, capabilities and talent in place to drive our strategic priorities,” he said.
The upbeat announcement provides some relief for Bolland, who joined M&S five years ago. The company was able to signal a payout after increasing profit margins on clothing and homewares by 1.9 percentage points, thanks to better deals with suppliers and less discounting. Profit margins also rose at the food business, which opened 62 new Simply Food outlets.
Performance at M&S’s overseas business, a key plank of Bolland’s strategy, was disappointing. Operating profits dived nearly 25% to £92m, amid political and economic difficulties in Russia and elsewhere. Sales also went into reverse at M&S.com, falling by 2%.
Bolland said M&S would increase gross margins on its clothing and homeware ranges by between 1.5% and 2% as the company improved its logistics network and IT systems. The company is also confident it will improve clothing profitability by getting better deals with suppliers as it cuts out middlemen with the help of veteran sourcing experts, brothers Mark and Neal Lindsey, hired by Bolland last year.
The company said it expected the clothing and home markets to remain “highly competitive” but would focus on bringing more new ideas, better quality and more stylish design to shoppers as well as better availability of product.
This article was written by Sarah Butler, for theguardian.com on Wednesday 20th May 2015 08.47 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010