Retailer Marks & Spencer has posted a 10 per cent drop in first-half profit after second-quarter underlying sales fell for the first time in two years.
The 127-year-old group, Britain's biggest clothing retailer which also sells homewares and upmarket food, said today it made a profit before tax and one-off items of £315.2 million (€367.9 million) in the 26 weeks to October 1st.
That compares with analyst forecasts of £298-327 million and a profit of £348.6 million in the same period last year.
Sales from M&S' British stores open over a year fell 0.7 per cent in the second quarter, with a 2.5 per cent drop in general merchandise sales partially offset by a 1 per cent rise in food.
Analysts had expected a 0.9 per cent fall in total UK like-for-like sales, with a 2.8 per cent decrease in general merchandise sales and a 1.1 per cent rise in food.
Total first half sales, excluding VAT sales tax, increased 2.4 per cent to £4.7 billion, with market share maintained in clothing and food.
M&S said the second half had started in line with its expectations. "We remain cautious about the outlook but are well set up for the all important Christmas period," it said.
While retailers are hopeful of stronger demand this Christmas than last year, when sales were hit by heavy snowfall, analysts are worried high stock levels could lead to a frenzy of discounting that undermines profitability.
Clothing chains have been suffering extra pressure from higher cotton prices and wage inflation in key manufacturing countries such as China.
M&S, which is spending £600 million over the next three years revamping stores, ended the half with net debt of £1.97 billion and maintained its interim dividend at 6.2 pence.
Shares in M&S, which have lost 18 per cent of their value over the last six months, closed Monday at 326 pence, valuing the business at £5.17 billion.
Reuters
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