The share price of Marks and Spencer (LSE: MKS) has tumbled 3.3% so far this morning, following the announcement of a fall in underlying annual profit for the third year in a row in its results for the full year to 29 March 2014.
Despite a 2.7% rise, to £10.3bn, in group sales — within which UK sales grew by 2.3%, with food sales up 4.2%, outperforming the market on a like-for-like basis according to M&S — the company’s underlying pre-tax profit dropped 3.9%, to £623m — that’s down over 17% from the £780 reported in 2011.
Amidst the gloom of a third year of fallen profits, bright spots included a 23% rise in “multi-channel” (M&S.com) sales, 6.2% growth in International sales (with 55 new international stores being opened during the year), and a return to growth for clothing sales in Q4.
Basic earnings per share (eps) grew almost 15% to 32.5p (although eps was only up 0.9% on an underlying basis) and the board has recommended a final dividend of 10.8p per share. That brings the full year payout to 17p per share, which is level with last year.
Looking ahead, the company says that the gains in operational efficiency it’s making should lead to a “significant improvement” in the gross margin for its general merchandise business — where sales for 2013/14 were flat — over the next three years, with a smaller improvement in the food gross margin. But, overall, it expects operating costs to rise by about 4%, owing to increased depreciation, the effect of inflation, and the addition of new space.
Commenting on the results, Chief Executive Marc Bolland said:
“M&S grew sales by 2.7% last year. We are focused on improving our performance in General Merchandise and were pleased to see early signs of improvement. Our Food business had a very strong year, consistently outperforming the market.
“Three years ago, we recognised the scale of investment required to transform our business, investing to strengthen our foundations and improve our customer offer. We are making solid progress on this journey and are now focused on delivery.“
At 436p, Marks & Spencer’s share price is now at the same level as this time last year, under-performing the FTSE 100’s 1% gain in that time. And the story over five years is worse, with Marks & Spencer’s 34% rise significantly lagging the index’s 57% rise.
