Clothing sales burden Marks & Spencer annual results

Marks & Spencer has incurred in its second straight fall in profit before tax and one-off items, that came at 665.2 million pounds in the year to March 30, on sales up 1.3 percent to 10 billion pounds. Weak results were heavily drowned by poor

clothing sales.

Marks & Spencer reported a pre-tax profit of 564 million pounds, compared to 658 million pounds last year a year ago and the lowest in nine years. Meanwhile, profit before tax and one-off items came at 665.2 million pounds in the year to March 30.

Sales of general merchandise - which includes clothing - fell 4.1 percent in the year. The retailer´s clothing division has an 11 percent market share in the UK, according to the BBC.

Speaking to BBC Radio 4's Today programme, Bolland said: "We won't duck the fact that we feel we have underperformed in general merchandise. We have to improve on quality", he added.

Bolland also said the company would focus on better quality and styles in womenswear, deliver more compelling and clearer sub-brands, and make shopping easier in its stores.

Trusted to handle a delicate situation, Bolland said: “We are working hard to get the General Merchandise performance back on track. We have already made progress in our operational execution, and our new Autumn/Winter ranges have received a positive reaction. We are very pleased with Food performance which benefitted from our continued focus on delivering innovation, and unrivalled quality and provenance. Our International operations performed well in key markets and our Multi-channel business delivered strong growth.”

According to a poll published on the retailer’s website, analysts expected profit to come somewhere in the region of 640-670 million pounds, with a consensus of 658 million. This is a 3.2 percent decline on the 687.2 million pounds made in 2011-12.

M&S annual dividend at 17 pence

Despite the frail results, the retailer wanted to reassure its investors by keeping its annual dividend at 17 pence a share.

Shares in M&S hit a five-year high the week prior to release its annual report, when it unveiled its new Autumn/Winter clothing ranges. They were up 4.5 percent to 460.25 pence, valuing the firm at 7.5 billion pounds, according to data collated by Reuters.

Marks & Spencer Group stock had its ‘sell’ rating restated by analysts at Investec in a research report issued to clients and investors on Tuesday. Meanwhile, analysts at Morgan Stanley reiterated an ‘overweight’ rating on shares of Marks & Spencer Group in a research note to investors on Tuesday. They now have a 440 pence price target on the stock. Separately, analysts at Barclays Capital reiterated an ‘underweight’ rating on shares of Marks & Spencer Group in a research note to investors on Monday. They now have a 320 pence price target on the stock.

The stock has risen 30 percent over the past year.

2013-14 Outlook

M&S forecast capital spending would be 775 million pounds in 2013-14, down from previous guidance of 850 million, and around 550 million in 2014-15, down from 600 million previously.

The group forecast an "underlying profit improvement" in the 2013-14 year but cautioned it expected to incur about 30 million pounds of non-recurring dual-running costs as a result of the transition to a new web platform and the opening of a new distribution centre in Castle Donington, central England.

“Lower capex (capital spending) guidance for 2013/14 onwards … could mean improved dividends, share buybacks or even a one-off payout,” Panmure Gordon & Co. analyst Jean Roche said.