EXTRA: M&S Annual Profit Falls As Costs Of Transformation Plan Hit

M&S profits plunge 62pc amid sweeping store closure plans

M&S shares - down 7% in the year to date and the biggest fallers on the FTSE 100 on Tuesday - rose 6% in early trading on hopes the worst is behind the 134-year-old retailer.

M&S is one of the UK's leading retailers, offering own-brand food, clothing and home products in its 1,433 stores worldwide and online.

M&S shares have fallen 26 percent over the a year ago and it risks being booted out of the FTSE 100 index as it is now worth less than both online grocer Ocado and online fashion website ASOS, starkly illustrating how shopping habits have changed in only a decade.

The figure of more than 100 closures includes 21 that have already shut and 14 stores newly identified for closure.

Prior to Wednesday's update analysts were on average forecasting an underlying pretax profit of 555 million pounds for 2018-19.

The chain reported pre-tax profit in the year to 31 March came in 62% down on the previous year at £66.8m. Comparable food sales were down 0.3 per cent. Revenue nudged up 0.7 per cent to £10.7 billion.

M&S highlighted the continued migration of shopping for clothing and home online, together with the development of global competition and discounters as threats to its business and market position, which led to the decision to accelerate its transformation plan to modernise its business. "Accelerated change is the only option", it said.

The British retailer has extended its closure plans as it is focusing on a minimum of a third of its sales online, as per the statement made by the high-street chain.

Looking to the year ahead, M&S said it expects Clothing & Home gross margin to be flat to up to 50 basis points higher, "with the first half of the year adversely affected by currency and sale timing".

Looking further into its "structural issues", M&S said that although online sales are growing, its online capability is "behind the best of our competitors and our website is too slow". "The new organisation will largely be in place by July and the team is now tackling transforming our culture to make M&S a faster, lower cost, more commercial, more digital business", Rowe added.

Rowe said it was targeting sustainable, profitable growth in three to five years time.

"M&S is now teetering on the edge of relegation from the FTSE 100 in the quarterly reshuffle next week", said Laith Khalaf, senior analyst at Hargreaves Lansdown.

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