M&S sees slump in profits

Marks & Spencer today blamed a 19 per cent slump in profits on poor sales of lingerie and women's clothes.

The failure in two areas where the retail chain used to be so strong led to profits falling to £618.5million from £763.2 million in the year to April.

M&S said sales of its clothes had been "disappointing" as its customers rebelled against poor ranges, uncompetitive prices and badly laid-out stores.

Lingerie did badly because of "an over-complex range" that put off shoppers, said the company once famed as the unquestioned supplier of underwear for millions of British women.

Chief executive Stuart Rose, who was appointed a year ago to turn around the company's fortunes, said: "Our clothing performance was driven by continuing weakness in womenswear." The only bright spot, he said, was the Per Una range.

Mr Rose was parachuted in last year to fend off a £9 billion takeover bid from tycoon Phillip Green. He admitted that the clothing ranges suffered from "inconsistent" pricing that could not compete with rivals such as Next.

But he insisted that new pricing levels are being introduced "giving real choice for all our customers." Clothing sales were down just over three per cent and its share of the clothing market, which M&S used to dominate, fell 0.5 per cent to 10.5 per cent.

Underlying food sales were down 2.6 per cent, while homeware sales crashed by 21 per cent after the experimental "lifestore" format was abandoned.

The figures are in line with City analysts expectations but will be seen as Mr Rose's last chance to restore the fortunes of a company that has been overshadowed by aggressive supermarket competitors such as Tesco and Asda.

Underlying sales have declined for six quarters in succession and Mr Rose has admitted that there will be some serious "head scratching" if a recovery is not well under way by next spring.

He has drafted in a former Asda clothes chief Kate Bostock as director of womenswear to overhaul Marks's much criticised clothing ranges. However, the company is now struggling with the sudden downward lurch in consumer confidence. Today it warned that "the outlook remains challenging, with tough economic and competitive conditions expected to continue". The company added: "We are focused on delivering better quality, value and styling across all our product ranges, as well as improving service levels and store environment. We have made good progress, however, there remains much to do."

M&S last week named former Treasury official Lord Burns as successor to current chairman Paul Myners from July 2006. Lord Burns joins the board as deputy chairman on 1 October this year.

Mr Green announced in February that he had no plans for another crack at M&S. This means under UK takeover rules he is excluded from bidding again until at least late August.

M&S said another reason for the slump in profits was having to slash prices to shift excess stock, and the retailer said £1.3 billion of old products and commitments had now been cleared.

Revenues from its UK stores were

1.7 per cent lower at £7billion during the year to April.

In spite of the fall in profits and revenues, Mr Myners said the group was "making good progress

on laying the foundations for recovery" and the benefits should become increasingly apparent.

The turnaround plan has seen more than 650 staff laid off at its head office in London and the sale of financial services arm M&S Money for £769 million.

Meanwhile, Mobile phone group Vodafone today said it had rung up a three per cent in annual pre-tax profits to £10.3 billion. The Newburybased company said it had met or topped all its stated targets during the year.