Enormous profit drop for Marks & Spencer

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Marks & Spencer Group Plc reported full-year earnings that beat analysts' estimates as growth in its food business and cost-cutting overcame persistent weakness in its clothing unit.

The profit decline came as fourth quarter clothing and homeware like-for-like sales fell by 5.9%, more than analysts' forecasts for a 3.3% decline, having increased by 2.3% in the previous quarter.

For the full-year, clothing and homeware like-for-like sales fell by 3.4%, and like-for-like food sales fell by 0.8%, giving a total like-for-like sales decline of 1.9%.

Stripping out these items, adjusted profit still fell by 10.3 per cent, to £613.8m.

However the company, which also sells upmarket food, said on Wednesday it did not anticipate a tough trading environment improving any time soon.

Steve Rowe, installed as chief executive past year, said there was much still to do to turn around the fortunes of the company but said he was pleased with progress.

The company also said it had been listening to customers and would improve the product range in its smaller stores, focusing on more children's clothing and homewares.

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Its clothing division has been a perennial headache for M&S, with years of falling sales.

But the cost of its turnaround will continue to weigh on results, the group warned, particularly in the first half of the new financial year.

The company, which launched a review of its store portfolio last November, said today that it spent £75m on new United Kingdom shops in the year to 1 April, compared with £106.4m the previous year.

Rowe, who replaced former boss Marc Bolland in April, announced a five-year plan to close around 30 United Kingdom clothing and homeware shops and convert dozens more into food stores in November.

The group's chief executive Steve Rowe has been trying to turn around the retailer's fortunes by closing down stores as he looks to revive the group's underperforming clothing division.

This comes as the squeeze from the Brexit-hit pound takes its toll on household budgets, while high street chains have also been impacted by a shift in spending towards leisure and eating out. "We achieved a huge amount in the year and whilst there is still much to do, I am pleased with our progress and we remain on track", CEO Steve Rowe said.

"While it should be music to our ears that 25% of clothing and home space is set to be refurbished over the next five years, this is too little and too slow to make an impact on overall brand perception".

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