By Peter Evans
LONDON-Marks & Spencer PLC Group (MKS.LN) warned Tuesday
that recent trading has been volatile as it reported a 10% drop in
first-half net profit, but said it is on track to reverse months of
underperformance in its clothing division as management changes
start to take effect.
"We are pleased to report a better performance across the
business in the second quarter," said Chief Executive Marc Bolland
in a statement.
Mr. Bolland has faced a dire consumer economy in the U.K. since
taking charge of M&S in May 2010, but has also struggled to
overcome more fundamental problems facing the retailer, especially
in its ailing clothing department. He pledged GBP500 million to
improve U.K. stores and set out ambitious sales growth targets
underpinned by international expansion. But he was forced to slash
the targets in May following M&S's biggest quarterly sales drop
for more than three years.
M&S is losing customers in its key womenswear market and
failing to attract new, younger shoppers amid intense competition
from the likes of Sweden's Hennes & Mauritz AB (HM-B.SK) and
Inditex SA's (ITX.MC) Zara.
The company said same-store sales in the U.K.--measured from
shops open at least a year--fell 1.4% in the six months to Sept.
29, slightly better than expectations after a strong performance by
the food division. International sales grew by 3.6% in the
period.
However, the retailer said same-store sales in its general
merchandise business, which includes clothing and accounts for more
than 40% of its GDP9.9 billion annual revenue, fell 4.3% in the
half and 1.8% in the second quarter. It's the seventh successive
quarter that the division has failed to show growth.
Discount fashion chain Primark, owned by Associated British
Foods (ABF.LN), Monday posted a 3% rise in full-year same-store
sales, highlighting the distance M&S still has to travel to
catch up with rivals on the high street.
M&S said the impact of recent changes to its management
team--including the appointment of a new head of general
merchandise--would be felt by customers in the summer with the
launch of new fashion lines.
M&S posted net profit of GBP227.2 million ($363.2million) in
the first half, down from GBP252.4 million from a year earlier, on
revenue slightly higher at GBP4.70 billion.
Pretax profit fell 9.7% to GBP289.5 million, above analysts'
expectations of GBP281 million, according to FactSet data.
-Write to Peter Evans at peter.evans@dowjones.com