M&S’ pre-tax profits fell by 18.5% to £488.8m in the 53 weeks to 2 April, despite a 2.4% increase in full-year revenue to £10.6bn. Food sales were up 3.6%, and like-for-like sales in its food division were up 0.2%.
The high street retailer’s food business has fared better than its clothing division, but it has been affected by fierce competition in the UK grocery market, which has forced many retailers to keep prices low. It said its gross margin in food would likely remain “level” with last year.
It said: “There was continued strong growth in food as we outperformed a competitive market. We opened 75 new Simply Food stores which are performing ahead of expectations.
“We believe that our core strategy on food is clear and that our focus on quality, innovation and choice is right and will continue to deliver sustainable, profitable growth…
“But there is more that we can do to build on our product strengths, maintain a competitive price position and improve convenience.”
As part of its “strategic update”, the retailer said it wanted to extend its Simply Food store opening programme and continue with “competitive pricing while maintaining margin”.
Steve Rowe, chief executive of M&S, said: “We continued to outperform on Food but we underperformed on Clothing & Home sales. We are investing to re-establish our price position by sharpening prices and to enhance service by putting more employees into our stores.”
Overall, M&S has warned that its profits will probably drop again this year, because of changes to its clothing business, while conditions remain challenging both in Britain and abroad. Shares fell sharply in early trading today.
Last month M&S launched its new Spirit of Summer food range, which includes new biscuits, and pastry products.