Marks & Spencer profit suffers from restructuring

Disappointing sales figures and the high costs of store closures have impacted the results of Marks & Spencer. To finance the recent deal with online player Ocado, the British retailer will now issue new shares.

 

Transformation plan

In the last financial year (ending on 30 March), sales decreased from 10.7 to 10.4 billion pounds (11.8 billion euros). Operating profit fell from 670.6 to 601 million pounds (680 million euros). In fashion, sales went down by 3.6 %, in food by 0.6 %. Next year, fashion sales would fall again by 3 % and food sales by 1 %.

 

These disappointing figures are mainly the result of a major restructuring programme, with a large number of stores being closed - resulting in high one-off costs and a loss of revenue. Moreover, the restructuring is not over yet: in addition to the 35 stores that the retailer has already closed, another 85 will follow, bringing the total to 120 - much more than the 100 that were initially planned. CEO Steve Rowe still claims that the transformation plan is on track and that the first signs of improvement are becoming visible.

 

Marks & Spencer is currently preparing to issue new preferred shares (claims) to finance the deal with online retailer Ocado. M&S is paying Ocado 750 million pounds (just under a billion euros) for a 50 % interest in a new joint venture that will deliver groceries.