Ads
By
Reuters
Published
May 24, 2011
Reading time
3 minutes
Download
Download the article
Print
Text size

Marks & Spencer plans store revamp in tough market

By
Reuters
Published
May 24, 2011

May 24 - British retailer Marks & Spencer plans to test new store formats tailored to local demographics as it looks to counter tough trading conditions and build on a 13 percent rise in full-year profit.

Marks & Spencer
Pedestrians walk past a Marks & Spencers store in central London (Photo: Corbis)

Britain's biggest clothing retailer, which also sells upmarket foods and homewares, said on Tuesday the new formats would sell products selected against several criteria, such as age and affluence of shoppers, and have better layout and signs.

The tests, part of M&S chief executive Marc Bolland's plan for growth unveiled in November, will start this October.

Britain's retailers are mostly struggling as shoppers are hit by rising prices and austerity measures. Clothing chains are also facing soaring cotton prices.

"We have had a good start to the new financial year but we expect trading conditions in the year ahead to be challenging," M&S said, echoing comments from rivals.

The 127-year-old group, which serves 21 million Britons a week from around 700 stores and also has more than 320, mostly franchise, shops in 41 territories, made a profit before tax and one-off items of 714 million pounds ($1.2 billion) in the year ended April 2.

That was just ahead of a forecast for 710 million pounds in a company poll, helped by market share gains in both clothing and food, driven by new products such as stormproof suits and French-inspired Bistro ready meals.

Revenues rose 4.2 percent to 9.3 billion pounds and the dividend was increased 13.3 percent to 17 pence a share.

"Although there is not much new information to excite in this morning's statement, there is a feeling that a lot of work has been going on behind the scenes which will not be visible until later in the year, Espirito Santo analysts said.

They said revamped stores, and improved presentation of sub-brands, would address a key criticism of Marks & Spencer (M&S) customers who often feel its shops are confusing.

At 0758 GMT, M&S shares were down 1.44 percent at 391.3 pence, handing back some of their recent strong gains.

"We suspect the stock will now see a period of consolidation after an almost 15 percent rise in the share price over the last quarter," said Seymour Pierce analyst Freddie George.

M&S, which saw profit plunge from 1 billion pounds at the start of the economic downturn, has been outperforming rivals recently, helped by strength among older and more affluent customers coping better as incomes are squeezed.

Investors are also warming to Bolland's plan to revamp British stores, expand online and overseas, and improve logistics and marketing, all of which have seen him make a string of high-profile management appointments.

M&S shares have outperformed the STOXX Europe 600 retail index .SXRP by 6 percent this year.

Bolland told reporters surging cotton prices had less impact on M&S than on rivals, many of which sell cheaper goods where raw materials make up a larger proportion of the price.

Finance director Alan Stewart played down suggestions the group might be interested in the auction for a majority stake in grocer Iceland Foods, saying most people would see the two companies as "not a good fit."

By Mark Potter and James Davey
(Editing by Hans Peters)

© Thomson Reuters 2024 All rights reserved.