Marks & Spencer (MKS) chief executive Steve Rowe has admitted that the group now faces “strong headwinds” in its food division. Problems at the general merchandising segment are well-documented, but like-for-like sales across M&S’s typically strong food offering have also started to slip – by 0.1 per cent in both the first and second quarters. Intense competition – the result of grocers growing online home delivery services – has also put downward pressure on margins, and management now expects a 75 to 125 basis point contraction by the end of the full year.
The wider group still faces “many structural issues”, but Mr Rowe is committed to the ongoing turnaround plan. This now includes slowing the rate of new Simply Food store openings and speeding up the rate of high street store closures. Encouragingly, margins are expanding across clothing and home, while the rate of sales decline slowed to just 0.1 per cent in the second quarter, compared with a 1.2 per cent slump in the opening period.
Analysts at Cantor Fitzgerald still expect pre-tax profit of £572m for the year ending April 2018, giving EPS of 27.7p, compared with £614m and 30.2p in FY2017.
| MARKS AND SPENCER (MKS) | ||||
| ORD PRICE: | 332.6p | MARKET VALUE: | £5.4bn | |
| TOUCH: | 332.1-332.9p | 12-MONTH HIGH: | 398p | LOW: 307p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 178p* | NET DEBT: | 70% | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 4.99 | 25.1 | 1.0 | 6.8 |
| 2017 | 5.13 | 118 | 5.2 | 6.8 |
| % change | +3 | +371 | +420 | - |
| Ex-div: | 16 Nov | |||
| Payment: | 12 Jan | |||
| *Includes intangible assets of £657m, or 40p a share | ||||
