The British retailer, a top-10 holding of Ben Whitmore’s £1.68bn Jupiter Special Situations Fund and the Investec Total Return fund, co-managed by David Lynch and Alastair Mundy, ended the year with pre-tax profits down a staggering 63.5% to £176.4m.
A good chunk of the hit to profits was due to the major restructuring initiative that is a part of CEO Steve Rowe’s plans to simplify the business and recover the firm’s flailing clothing and home department.
Clothing and home sales declined over the period by 2.8%, but the firm pointed out that the gross margin was 105 basis points higher and the segment saw full price sales growth of 2.7%.
Last November, Rowe delivered a bombshell to investors when he announced 30 M&S stores in the UK would be shuttered and the group would cease trading in 10 overseas markets.
Discounting the costs related to the brand’s revamp, profit before tax was still 11% lower at £613.8m.
While Hargreaves Lansdown senior analyst Laith Khalaf recognises that Rowe “is pulling out all the stops to turn performance around,” he notes that “M&S is facing some big economic headwinds, in particular the fall in sterling, which is pushing up the price of food and clothes against a backdrop of squeezed consumer incomes.”
“The high street is also in decline as more of us turn to our mobiles and tablets to do our shopping, which leaves M&S fighting an even steeper uphill battle,” said Khalaf.
