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Marks & Spencer tackles structural issues as profits slump

Marks & Spencer’s pre-tax annual profits fell by 62% to £66.8 million from £176.4 million in 2017. The retailer was hit by a one-off charge of £321 million from an expanded store closure programme, announced yesterday.

It is taking an axe to its store estate in the face of continued migration of clothing and home online, the development of global competition, the growth of home delivery in food and the march of the discounters. Various other issues need to be urgently addressed, including the supply chains in both Clothing & Home and in Food requiring significant upgrades, its online capability being behind the best of its competitors and its sluggish website. Whilst the fulfilment centre at Castle Donington has struggled to cope with peak demand and some of its systems are dated. 

“At our half year results in November I outlined the need for accelerated change at M&S,” said Steve Rowe, Marks & Spencer CEO. “The first phase of our transformation plan, restoring the basics, is now well under way and the actions taken have increased the velocity of change running through our business. These changes come with short-term costs which are reflected in today’s results.”

He added: “There are a number of structural issues to address and we are taking steps towards fixing these. The new organisation will largely be in place by July and the team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business. This is vital as we start to leverage the strength of the M&S brand and values across a family of businesses to deliver sustainable, profitable growth in three to five years.”

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