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Under-fire boss Bolland puts faith in new M&S collections as 4% fall in clothing sales hits profits again

Marc Bolland, the under-fire boss of Marks & Spencer, continued to put his faith in the retailer’s upcoming women’s clothing range as the 129-year-old firm said annual profits fell for the second year in a row today.

When the new range hits the shelves in July it will be seen as a make-or-break moment for Mr Bolland and his new general merchandise team after its clothes sales continued to sage and underperform the chain's strong revenues from groceries.

In a ‘challenging market’ M&S said pre-tax profits were £665.2million for the year to 30 March, a fall of 6 per cent on a year earlier and well below City forecasts for £710million at the beginning of the financial year, despite group sales rising 1.3 per cent to £10billion.

Profits fall: Marks & Spencer announced that profits fell for a second straight year as clothing sales fell 4 per cent in the year.

M&S’s clothing division, which has an 11 per cent market share in the UK, has struggled with falling sales in recent years losing market share to rivals Debenhams and Primark. Sales in its general merchandise division continued to lag behind the rest of the business today, falling 4.1 per cent in the year. 

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Mr Bolland has put John Dixon, the former boss of M&S’s food business in charge of the retailer’s general merchandise department which saw the recent addition of Belinda Earl, the former chief executive of Debenhams and Jaeger. 

Style guru: Belinda Earl, the former CEO of Debenhams recently joined M&S to help get its flagging clothing sales back on track.

She is head of style, following the departure of Janie Schaffer after just three months in April, and charged with regenerating Marks' reputation among its core, mature female clothes customers.

Ms Earl recently admitted she had suffered ‘a few sleepless nights’ ahead of the autumn/winter collection which previewed last week.

‘We are not afraid to raise the taste bar,’ she said last week. ‘You will be seeing a lot more fashion and a lot more of Marks and Spencer at fashion weeks. 

‘It is fashion with a capital F.’

Shares in M&S hit a five-year high last week after its clothing strategy update and eagerly awaited autumn/winter ranges were well received by analysts and the fashion press. They were 2.2 per cent higher today at 450.20p.

But James McGregor, director of retail consultants, Retail Remedy, raised concerns M&S may not have done enough for its core customers.

‘What matters now is the autumn/winter range. While the launch of the new range went down fairly well, its success now depends on the execution. How will it be presented in store?’ he said.

‘I'm worried that M&S may not have done enough for its core customer. The sense with the new range is that it has targeted a younger customer rather than introduced a new range for its more fashion-conscious core customer.

There has been speculation Mr Bolland’s own future rests on the success of the general merchandise team, as he has come under increasing pressure to turn around M&S’s flagging clothing sales. 

Uncertain future: M&S boss Marc Bolland has faced pressure from shareholders to turn around flagging clothing sales.

He has repeatedly said the general merchandise team is not expected to make a major impact on sales until the ranges start hitting shops in late July.

Today, he said M&S was working hard to get the general merchandise performance back on track.

‘We have already made progress in our operational execution, and our new Autumn/Winter ranges have received a positive reaction,’ he said.

Sales from the clothing division were down 2.4 per cent in the year but had been as much as 5 per cent lower at the start of the period until the company took 'decisive action'.

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As last year underlying sales in M&S’s food division helped offset its falling sales in clothing and homeware, rising 1.7 per cent.

Speaking to BBC Radio 4's Today programme, Mr Bolland said: 'We won't duck the fact that we feel we have underperformed in general merchandise.

'We have to improve on quality,' he added.

Mr Bolland also defended the company's tax affairs in the wake of controversy over tax avoidance schemes.

 

He also maintained that M&S paid more corporation tax than many other FTSE 100 companies of similar size.

M&S, whose shares have risen 30 per cent over the past year after periodic bouts of bid speculation, kept its annual dividend at 17p a share.

The group forecast ‘underlying profit improvement’ in the 2013-14 year but cautioned it expected to incur about £30million of non-recurring dual-running costs, as a result of the transition to a new web platform and the opening of a new distribution centre in Castle Donington, central England.

M&S also announced another change at the top, as Steven Sharp, executive director of marketing, retired after nine years to be replaced by Patrick Bousquet-Chavanne, formerly of Estee Lauder.

The company said: 'The improvement in product will take time to come through, but our customers will start to see the benefits of the changes from this summer.'

M&S said it was two years into a three-year plan to turn it into a 'truly international, multi-channel retailer'. Online sales were up 16.6 per cent and now account for 13 per cent of general merchandise takings.

John Ibbotson of retail consultants Retail Vision called the numbers dismal.

'For too long now it has been the same old story, namely general merchandise struggling, food just about keeping the retailer afloat,' he said.

‘Increasingly, M&S seems like a rabbit in the headlights. However many operational improvements it makes, it's all immaterial unless the retailer can rediscover its panache.

'It’s make or break time at M&S. Despite its restructuring, overhaul of IT and logistics, and continued strong food sales, it's all in vain if clothing sales don’t improve by Christmas.’





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