Marks & Spencer Full-Year Results: What The Analysts Said

By Steve Wynne-Jones
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Marks & Spencer Full-Year Results: What The Analysts Said

Marks & Spencer has posted a 62% decline in pre-tax profit for full-year 2017/18, with chief executive Steve Rowe eager to transform the retailer into a "faster, lower-cost, more commercial, more digital" business.

The results come hot on the heels of the retailer announcing that it plans to close as many as 100 stores across its estate between now and 2022.

Here's how leading retail analysts viewed the retailer's performance.

Russ Mould, AJ Bell

“A sharp jump in Marks & Spencer’s shares this morning means that the retailer got its news management right, by releasing the details of big-store closures ahead of its results, but the numbers themselves are nothing to be proud of and show just how much work there is still to be done.

“At least the accelerated pace of change suggests that chairman Archie Norman is just starting to get going and help chief executive Steve Rowe with the tough decisions that need to be made. However, even Mr Rowe admits that it is going to be a long haul, as the goal now is to deliver sustainable, profitable growth ‘within three to five years’.


“Investors now have to decide whether that’s too long to be left waiting at the checkout. At least an unchanged dividend of 18.7p per share equates to a dividend yield of around 6% – the twelfth-highest yield in the FTSE 100, based on ordinary dividends alone – so patient holders may resist the temptation to throw in their M&S Homeware towel, at least for now.”

Kate Ormrod, GlobalData

“As uninspiring as its clothing ranges, today’s results, with UK revenue at £9.6 billion, once again emphasise M&S’s reliance on its food business – and not only that, but its dependency on new food stores, with l-f-l food growth having evaded the retailer since Q3 FY2016/17 – and even then, only achieved for one quarter.

“The £51.6 million sales decline in Clothing & Home is of little surprise after yesterday’s announcement that M&S is to accelerate its store closure programme, with a total of 100 full-line branches closing by 2022, up from 60 originally planned. Resizing its network is essential for M&S in the digital age, despite the costs, however, not biting the bullet earlier will haunt the retailer for some time – just as it should New Look, Debenhams and Arcadia.”

Scott Ransley, Stifel

“It’s tempting to label M&S a holed supertanker or black-and-white TV. M&S’s transformation programme is grinding into action with a target of profit growth in three to five years. The biggest challenge for the group is that more modern competitors continue to move forward while M&S tries to develop digital and downsize the physical estate.


“The objective is ‘to deliver sustainable, profitable growth in three to five years’, although it is unclear what the base level of profitability will be, given the current downward trajectory. The group highlights its own issues in online, stating, ‘Our online capability is behind the best of our competitors and our website is too slow. Our fulfilment centre has struggled to cope with peak demand and some of our systems are dated.’ Added to an over-spaced non-food business, turning around M&S remains as big a job as ever.”

Clive Black, Shore Capital

“The business, now in the hands of Messrs Norman and Rowe, is starting to make decisions that have arguably been needed for many years. The frustration for long-only investors is that M&S has been in perpetual transition, but there remains the need for more patience to come. For FY2019, we anticipate a pretty flat EPS and DPS outcome, albeit this figure needs to be confirmed. Encouragingly, the circa [sic] £300 million cash dividend cost is all but covered by FCF. [...] However, there is that need for clearer line of sight as to more substantial EPS and FCF growth for us to turn more positive, and so we continue to wait for the stars to more effectively align.”

Richard Lim, Retail Economics

“Accelerating the pace of transformational change has led to significant write-offs across the business. Overcapacity concerns are at the heart of plans to close a quarter of legacy Clothing and Home space. The retailer has too much space in today's digitally driven age of consumption. These are bold decisions to embrace, adapt and innovate in order to survive.

“Focusing on prime locations with sustainable levels of footfall, pushing forward right-sizing initiatives and utilising excess space to sweat assets will be critical in restructuring the business that is fit for purpose moving forward.”


David Beadle, Moody's

“Underlying results are slightly ahead of our expectations, but ongoing weakness in the core UK business highlights the rationale for the transformation programme that is under way. The company’s net cash generation remains solid, and the company is still adequately positioned in the Baa3 rating category.”

© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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