M&S profits edge up to £805m

EMBATTLED Marks & Spencer was forced to admit again today that it is losing out in its womenswear market. Chief executive Roger Holmes unveiled a series of measures aimed, once more, at kick-starting a recovery at what was once Britain's most profitable retailer, including further cuts in suppliers, new product ranges and a new look for the stores.

Although company profits rose during the year, departing chairman Luc Vandevelde said: 'The market-share gains we had hoped to achieve were not delivered. However, we did increase our share in menswear, lingerie, per una and women's casual wear and held our market share in food.'

Market share in clothing fell by 0.2% to 11% and while the share in food was maintained, there was a fall-off in recent months.

Industry reports also suggest food sales have tumbled further in recent weeks, as the group loses custom to Waitrose and Tesco.

Profits at the group were slightly ahead of City expectations, with a 6% increase in underlying annual profits to £805m. This is still well short of the £1bn-plus it made in 1997/1998. Sales at the UK retail operations were up by 3.8% to £7.3bn for the year to 3 April.

Today's announcement came as it emerged that the group is to fit out the lobby of its new £52m headquarters in Paddington with Italian furniture that cannot be bought at its stores.

The walls are lined in black rubber and there are black, white and red chairs, with mustard-coloured sofas. The decision not to choose furniture from its own stores was seen by the City as another sign of the group's insensitivity and lack of confidence in its own brand.

Holmes admitted last month that the group's fourth-quarter performance was 'clearly not good enough' after a 5.2% fall in non-food sales in the 11 weeks to 27 March.

It was the group's most dismal trading update since its brief recovery ran out of steam and means M&S has now gone through three consecutive quarters without any market share gains.

Its continued poor performance is in stark contrast to rivals such as Next Group, where sales have continued to grow strongly.

M&S is searching for a new chairman to kick-start the recovery. This follows Vandevelde's decision to leave after criticism that he was spending too much time on outside interests.

The board is said to be torn between whether to appoint a City 'grandee' or someone with retailing experience, such as former Arcadia boss, Stuart Rose, highly regarded in the retail world.

If it does appoint an experienced retailer, the role of former management consultant Holmes would be called into question. He is already under pressure, with critics saying he lacks the necessary skills to lead the group out of trouble.

Hopes are pinned on 47-year-old Kate Bostock, poached by M&S earlier this month to head its struggling womenswear operations.

She is running Asda's hugely successful George clothing business, but it is expected to be several months before she will be able to start at M&S.

Made in Britain no longer the boast

THE Marks & Spencer name was once virtually synonymous with the 'Made in Britain' tag. As recently as five years ago, M&S's proud boast was that it bought 90% of its clothing from Britain and 10% from overseas suppliers.

Today, however, that has been reversed, with a mere 10% of its supplies now being sourced from British makers.

The vast majority of the overseas supplies come to M&S via agents, who charge commission for their services. Today's moves will see the group cut out many of those middlemen and deal directly with the suppliers. This, it says, will simplify the supply chain and further reduce costs.

Jude Brimble, national officer for clothing and textiles, at the GMB union, said: 'M&S's decision to source yet more work abroad is a devastating blow for the British clothing industry.

'Over 35,000 jobs have already been lost in the last two years, many as a result of M&S's decision to source over 90% of its clothes from abroad.

'Behind the figures is a terrible impact that M&S's decision has had on individuals, their families and whole communities. The GMB urges M&S customers to check their clothes are made in the UK.'

The switch to overseas suppliers may have provided a boost to the group's flagging profits, but it has had a huge impact on the British textiles industry, leading to thousands of job losses.

Peter Salsbury, then M&S chief executive, wielded the axe so freely he was dubbed 'the Butcher of Baker Street'.

Useful links