London: Marks & Spencer said on Wednesday it needs to modernise urgently to survive after a second straight annual profit fall and a £321 million charge for a store closure programme.
Shares in the 134-year-old British retailer were up 5.4 per cent at 0720 GMT as the underlying profit figure beat analyst forecasts and it maintained its dividend, while turnover was broadly flat at £10.7 billion.
M&S, one of the best known names in British retail, faces unrelenting competition from supermarkets, fashion chains like Zara, H&M and Primark, as well as Amazon, while pressure on consumer spending is hampering efforts to revive its business.
In November, two months after retail veteran Archie Norman joined as chairman, M&S detailed a five-year programme of store closures and relocations, and moves to make its misfiring food business more competitive.
M&S shares have fallen 26 per cent over the last year and it risks being booted out of the FTSE 100 index as it is now worth less than both online grocer Ocado and online fashion website ASOS, starkly illustrating how shopping habits have changed in only a decade.
On Tuesday M&S said it would close 100 UK stores by 2022, as it strives to make at least a third of clothing and home sales online. At the end of 2017/18 M&S had 1,035 stores in the UK, with 300 Clothing, Home and Food, 696 Food-only and 39 Outlet stores.
"We have to modernise our business to ensure we are competitive and reignite our culture. Accelerated change is the only option," M&S said in a statement.
M&S said it made a pretax profit before one-off items of £580.9 million ($778.6 million) in the year to March 31, particularly hurt by a decrease in the food gross margin.
That was ahead of analysts' average forecast of £573 million but down from £613.8 million made in 2016-17.
After taking account of adjusted items of £514.1 million, including the charge relating to store closures, pretax profit was £66.8 million, a 62 per cent fall.
Steve Rowe, an M&S lifer who has been CEO for two years, said the firm was taking steps to fix the structural issues.
"The team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business," he said, targeting sustainable, profitable growth in three to five years.
M&S lost more ground in the fourth quarter, with like-for-like clothing and home sales down 3.4 per cent, worse than the previous quarter's 2.8 per cent drop, and same store food sales down 0.6 per cent, against a third quarter 0.4 per cent fall.
Prior to Wednesday's update analysts were on average forecasting an underlying pretax profit of £555 million for 2018-19.
"We do not think the downgrade cycle may yet be over," said analysts at Liberum, maintaining their "sell" rating.
M&S is not alone in finding the going tough. Fashion chain New Look, retailer Mothercare, Carpetright and department store House of Fraser are all shutting stores.
And Toys R Us, electricals group Maplin and drinks wholesaler Conviviality have all collapsed this year.