Britain's Marks & Spencer has reported a 10 percent decline in annual profit and said clothing and homeware sales fell in its latest quarter. David Pollard looks at the reasons why and whether Brexit is a factor.
Food may be one of its traditional strong points, but its latest numbers were hardly mouth-watering. A ten per cent drop in annual earnings - and, in the last quarter, sliding sales in food - and clothing. It is, though, all part of the plan - says the man brought in a year ago to turn around this iconic British retailer. SOUNDBITE (English) STEVE ROWE, CEO, MARKS & SPENCER, SAYING: "Last year, we outlined a fairly comprehensive plan to lay strong foundations for the future of Marks and Spencer. And that meant that we had to take some difficult decisions. The profit before interest and tax though - 614 million - was down 10 percent. And that's exactly in line with our plans and that's marginally ahead of City expectations." Investors appear to agree. Shares - already up 20 per cent in the last three months - rose two and a half per cent to a 12 month high - as they looked past the bad news. SOUNDBITE (English) OANDA SENIOR MARKET ANALYST, CRAIG ERLAM, SAYING: "We're seeing the money spent on adjusting local stores, on closing international stores side as well as other things. This is a costly procedure and it's going to take years and it's going to cost money over that time." But the store's challenges are more than just one layer deep. Along with one-off restructuring costs, a Brexit weakened pound means it's paying much higher prices for the 80 per cent of supplies it sources outside the EU. A problem its shoppers face too. SOUNDBITE (English) STEVE ROWE, CEO, MARKS & SPENCER, SAYING: "Really, it's about the economy. The customer is very fragile at the moment in terms of how they feel about their future economic wealth." A later Easter and other calendar effects also dented the results. But M&S maintained its dividend - saying it's pleased with its progress in what its boss calls its 'self-help story'.