M&S faces up to past errors as food, clothing sales fall

Bloomberg

Marks & Spencer Group Plc owned up to its mistakes, saying it needs to close more stores and catch up to rivals in e-commerce as Chairman Archie Norman tries to pull the UK retailer out of a crisis that has dragged on for more than a decade.
A decline in sales of food and clothing in the fourth quarter underlined the need for a restructuring of the 134-year-old fixture of the UK’s shopping districts, including plans to shut nearly one-third of its large stores.
The retailer said it’s accelerating a drive to become a “more commercial, more digital business.”
Chief Executive Officer Steve Rowe acknowledged the company’s past missteps, saying M&S was slow to embrace e-commerce and to respond to a slump in foot traffic on the UK’s shopping streets. After previous turnaround plans by former management failed to restore consumer interest in M&S apparel and shoppers even began defecting from its grocery aisles, he and Norman asked
for patience.
“The changes that are being made are really formative for our future,” Norman said in an analyst briefing. “Improvements in trading will take much longer. We are building a business for five to 10 years in the future.”
Despite the weakness, M&S’s forecast for the current year is not as bleak as some investors expected, and that helped lift the shares, which were up as 1.8 percent in London. Earlier they rose as much as 6.6 percent.
Under Norman, who became chairman last year, M&S is lowering prices and upgrading its e-commerce infrastructure. But competitors are giving it new headaches, with J Sainsbury Plc’s $10 billion acquisition of Walmart Inc.’s Asda threatening to intensify price competition in clothing and food. Soaring costs and stagnant demand are squeezing all of the UK’s store-based fashion retailers.
Same-store sales in M&S’s clothing-and-home division fell 3.4 percent in the fourth quarter, more than double the rate of decline that analysts expected. Comparable sales in food, long the engine of growth for M&S as its apparel operations slumped, fell 0.6 percent.
“It’s worrying to see that M&S’s slowdown in food has continued,” TCC Global analyst Bryan Roberts said.
“As retailers across the industry have invested more heavily in their premium and private-label offerings, M&S’s pricing has looked increasingly over the top.” The retailer recorded one-time charges of $689 million related to the store closings, cutting its pretax profit by 62 percent, to 66.8 million pounds, in the 52 weeks through March 31.
In the last two years M&S has recorded one-time charges worth almost a billion pounds.