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Marks & Spencer sees profit fall by 10 percent

By FashionUnited

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The veteran British retailer has seen its profit fall 9.6 percent during the first half of the year to 290 million pounds. They blame the 4.3 percent drop in like-for-like general merchandise sales in the half-year, which weighted

 total domestic like-for-like sales by 1.4 percent.

That
was at the top end of analyst forecasts of 250-305 million pounds and ahead of a consensus of 280 million pounds, according to a company poll, but down from a pro-forma 307 million pounds in the same period last year, pointed out Reuters.

According to an official statement released Tuesday, Marks & Spencer blames pressure on consumers' disposable incomes and “volatile” trading conditions for the figure, which compares with 307 million pounds profit over the same period last year.

"The issues we had were with merchandising and stock, we're now bucking the trends" summarized CEO Marc Bolland. In declarations for Sky News, Bollan also told that they “have repaired our womenswear position strongly over the second quarter. He added: "The first quarter was a difficult quarter as we explained three months ago, the second quarter has improved quite strongly."

Sales across the group were up 0.9 percent though, at 4.7 billion pounds and driven by strong performance in its food division and internationally. It was their UK stores the ones lagging the overall figures in the second quarter, with a 1.6 percent hike in food that somehow compensated the 1.8 percent fall in general merchandise sales.

It follows a 6.8 percent dip in general merchandise sales in the first quarter as a result of the wet summer weather and problems with stock availability, which left stores short of bestselling womenswear lines, unveiled the retailer.

With regards to the company’s stock performance, Bolland said recent trading has been "volatile", adding "This, coupled with continuing pressure on consumers' disposable incomes, makes us cautious about the outlook for the rest of this year. However, we are well set up for the Christmas trading period."

Despite the fall in profits, the results are likely to be well received by the stock market because the decline is slightly smaller than expected and sales improved in the second quarter of the year, stressed ‘The Telegraph’.

Actually, just a day before the figures were made public, market estimated that like-for-like general merchandise sales in the second quarter were down 2.5 percent. Gross margins will be “towards the top end” of a range from unchanged to a 0.25 percentage point increase, the London- based company said today as it reported a drop in underlying pretax profit to 296.8 million pounds. 29. Earnings beat the 280 million-pound median estimate of 13 analysts surveyed by Bloomberg.

Bethany Hocking, an analyst at Investec, said for ‘The Telegraph’: "Unlike with Next, M&S's figures do not include the expected strong October. The highly promotional strategy in GM (general merchandise) is brand-damaging, in our view. We don't see acceptable returns on 2.4 billion pounds capital expenditure in 2013 to 2015 and we expect bid speculation, which has driven the shares higher, to die down."

In the same vein, “General merchandise did show signs of a big pickup, but autumn-winter remains pretty key,” John Stevenson, an analyst at Peel Hunt in London, said by phone to ‘Businessweek’. “They made some basic errors with ranges, so we can gain comfort” from the rebound in sales, said Stevenson, who has a hold recommendation on M&S.

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