Marks & Spencer Group Plc, the U.K.’s largest clothing retailer, reported earnings that beat analysts’ estimates on improved sales of fashions and ready meals and said it had a “satisfactory start” to the first quarter.
Pretax profit, excluding property disposals, rose 4.6 percent to 632.5 million pounds ($904 million) in the 52 weeks ended March 27, the London-based company said today. That was more than the 628 million-pound median estimate of 21 analysts compiled by Bloomberg and ahead of the company’s forecast of 620 million to 630 million pounds.
Budget-priced ‘Wise Buy’ food offers and celebrity-backed advertising campaigns featuring former model Twiggy have helped sales improve. The retailer, whose new Chief Executive Officer Marc Bolland started this month, said it’s “cautious” on the outlook for the year ahead, citing consumer concern about the impact of the U.K. budget that’s due to be announced on June 22.
“Although current ranges are winning back customers, new CEO Bolland will be under pressure to improve investor sentiment,” Singer Capital Markets analyst Mark Photiades said in an e-mailed note. “This might take time.”
Marks & Spencer fell 4.5 pence, or 1.4 percent, to 329 pence at 9:20 a.m. in London trading, less than the 2.5 percent drop in the benchmark FTSE 100 Index. The stock has fallen 18 percent this year, compared with the 4.8 percent decline of smaller competitor Next Plc.
In his first public comments since joining three weeks ago, Bolland said he will present a strategic review of the company at the time of the first-half results on Nov. 9.
The former head of William Morrison Supermarkets Plc is undertaking three months of “induction,” while Executive Chairman Stuart Rose runs the business, Bolland said today on a conference call. The CEO will take over from Rose after that.
“I’ll use the first three months to really understand the fashion business, the stores and the culture of the company,” he said. “M&S is a great business and delivering solid results and I think that’s a big compliment to Stuart and the team for all the work they’ve done since 2004.”
Rose said it’s been “so far so good in the first few weeks of this quarter.” The chairman, who is due to leave by March 2011, will stay for as long as needed, he said on the call.
Finance Director Ian Dyson will leave on Aug. 31, Marks said today. Dyson announced this month that he was stepping down to join Punch Taverns Plc. A replacement has yet to be named.
Marks is also seeking a new chairman to replace Rose, who is due to stand aside by March 2011. Former Cadbury Plc Chairman Roger Carr has ruled himself out of the top job, the Financial Times reported on May 22.
Total sales in the 52-week period rose 3.2 percent to 9.3 billion pounds, Marks & Spencer said. Revenue at U.K. stores open at least a year increased 0.9 percent, helped by a 5.1 percent gain in the final quarter of the year.
The retailer’s international unit increased operating profit 17 percent to 135.3 million pounds. Greece and Ireland were “heavily impacted by the economic downturn,” Marks said.
Net income in the year climbed 3.6 percent to 526.3 million pounds, Marks said. The final dividend was held at 9.5 pence a share, giving a reduced total for the year of 15 pence.
Net debt was reduced by 422.4 million pounds during the year to 2.1 billion pounds, the company also said.
“The debt level was a bit better than expected and they’ve had a satisfactory start to the quarter which is good as they exited the fourth quarter quite strong,” said Andrew Hughes, an analyst at UBS AG in London. He rates the stock “neutral.”