British retailer Marks & Spencer posted its lowest annual profit since 2009, hit by a drop in clothing sales, and said growth this financial year would be held back by investment in its online business and logistics. The 129-year-old company, battling to reverse seven straight quarters of falling underlying sales in clothing and homewares, said it expects a stronger performance next year, when new fashion ranges deliver results and capital spending falls.
At that point, it would look at improving returns for shareholders, the company said on May 21. Mark Bolland, chief executive since 2010, said the board and investors supported the company's plan and he refused to be drawn on whether he would consider his position if M&S's fortunes do not improve within 12 months.
"Timeframes that you put out are irrelevant," he told reporters, adding that investors are "voting with their feet" - a reference to the company's share price rise. M&S shares, up about 30 percent over the past year amid periodic bouts of bid speculation, hit a five-year high last week after the unveiling of its autumn/winter clothing range.
"Lower capex (capital spending) guidance for 2013/14 onwards ... could mean improved dividends, share buybacks or even a one-off payout," Panmure Gordon analyst Jean Roche said.
M&S aims to become an international multi-channel retailer, connecting with customers through stores, the internet and mobile devices. It is spending about 2.3 billion pounds ($3.5 billion) over three years on store revamps, logistics, IT and systems, as well as selective investment overseas.
But it has struggled in a faltering British economy and lost market share in its core womenswear business. The profit fall, which was cushioned by a rise in sales at its upmarket food business, is likely to affect Bolland's annual bonus, though he declined to comment on this.
Bolland is pinning his hopes on a new clothing strategy based on more stylish and higher-quality garments. Though the autumn/winter ranges unveiled last week by his new general merchandise team received generally positive reviews, some analysts remain sceptical.
"There are clear execution risks in the plan in general merchandise, no guarantee that international will improve this year and we remain concerned that food is beginning to run short of self-help," Credit Suisse analysts said.
Bookmaker Ladbrokes cut its odds on Bolland being out of a job before the year's end, to 1:2 from 8:11.
M&S also said it had appointed Patrick Bousquet-Chavanne as its new marketing director. Bousquet-Chavanne, currently corporate director of strategy implementation and business development, will succeed Steven Sharp in July.
Sharp has held the role since 2004 and will stay on as creative director until February. "There's no conspiracy theory here; this is genuinely in everybody's interest," he said.
M&S, which serves 21 million shoppers a week from more than 700 UK stores, made a profit before tax and one-off items of 665.2 million pounds in the year to March 30 on sales up 1.3 percent to 10 billion pounds.
The profit is down 3.2 percent on 2011/12 and compared with a consensus forecast of 658 million pounds in a poll of analysts published on the company's website.
The annual dividend was kept at 17 pence a share.
The group forecast an "underlying profit improvement" in the 2013/14 year but cautioned that it expects about 30 million pounds of non-recurring dual-running costs as a result of the transition to a new web platform and the opening of a distribution centre in Castle Donington, central England.
M&S forecast that capital spending would be 775 million pounds in 2013/14, down from previous guidance of 850 million pounds, and about 550 million pounds in 2014/15, down from 600 million previously.