Underlying profits slipped at Marks & Spencer, but the 1.2 per cent fall to £706m was better than expected, and chief executive Marc Bolland said that the group's new strategic plan was on track, despite lowering expectations for the revenue uplift the retailer is likely to generate. The sales uplift for the three-year growth plan has been scaled back to £1.1bn-£1.7bn from an original target range of £1.5bn-£2.5bn. That's disappointing, but the low valuation and chunky yield means M&S shares are still worth hanging on to.
The shortfall reflects continuing challenges in the UK, which means £200m less will be invested in new space than previously planned. General merchandise sales slipped 1.8 per cent last year, hit by an intense promotional environment in womenswear. However, trials of a new format at 15 stores are outperforming the wider estate, while underlying food sales climbed 2.1 per cent.
The decision to scale back physical expansion in the UK also reflects the ongoing shift to online shopping. After increasing multi-channel sales by 18 per cent to £559m last year, growth expectations remain on target. The international business is also performing well, with sales up 5.8 per cent to £1.1bn, and M&S plans to invest an additional £50m overseas in the remaining two years of the plan.
Broker Investec expects current year adjusted pre-tax profits of £693m and EPS of 33.4p (from 34.9p last year).
MARKS & SPENCER (MKS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 341p | MARKET VALUE: | £5.47bn | |
| TOUCH: | 340-341p | 12-MONTH HIGH: | 402p | LOW: 296p |
| DIVIDEND YIELD: | 5.0% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 174p* | NET DEBT: | 67% | |
| Year to 1 Mar | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 9.02 | 1.13 | 49.2 | 22.5 |
| 2009 | 9.06 | 0.71 | 32.3 | 17.8 |
| 2010 | 9.54 | 0.70 | 33.5 | 15.0 |
| 2011 | 9.74 | 0.78 | 38.8 | 17.0 |
| 2012 | 9.93 | 0.66 | 32.5 | 17.0 |
| % change | +2 | -16 | -16 | - |
Ex-div: 30 May Payment: 13 Jul *Includes intangible assets of £584m, or 36p a share | ||||
