MARKS & Spencer, Britain's biggest clothing retailer, has posted a fall in profits, and scaled back its plans to substantially increase its sales, blaming the "increasingly challenging consumer backdrop".
The company made an underlying pre-tax profit of £706m (€885m), down from last year £714m. This was slightly better than analysts expected, with the company saying it had cut costs ruthlessly, reducing the amount of food it had to throw out because it was damaged or out of date, for instance.
However, this is the first time that profits have fallen for three years. Marks & Spencer was once Britain’s most profitable listed retailer, and the first to ever make more than £1bn in a year but it now makes less money than Tesco, J Sainsbury, Wm Morrison and Kingfisher, the owner of B&Q.
Marc Bolland, the chief executive, said: “Marks & Spencer performed well in a challenging economic environment, growing group sales by 2pc and holding market share. We also made good progress with our strategic plans."
Total sales increased from £9.74bn to £9.93bn. And Mr Bolland said the company's target to increase sales substantially, by up to an extra £2.5bn, was being more or less scrapped because of the gloomy state of the British high street.
He said: "We are making good progress but successful execution of our strategy requires us to adapt to both market opportunities and current market conditions. In November 2010 we set out a target to grow our revenues by £1.5bn to £2.5bn over the next three years. As a result of the deterioration in the economic environment since we set out our plan, we now expect to achieve £1.1bn to £1.7bn increase in revenues. While conditions in the UK are predicted to be more difficult than originally forecast, we are on track to deliver both international and multi-channel targets."
However, he said that the company's plans to refurbish all of its UK shops, making them easier for shoppers to find their way around in, had worked in the initial 80 pilot stores. Sales at these shops had seen a 2.5pc sales uplift. The company will ensure all of its 700 UK shops will now be updated.
Marks & Spencer has been put under pressure from rivals including Next and Primark as well as the supermarkets, which have stolen many shoppers who are prepared to shop their for their basic clothing in grocery chains.
Despite efforts to pull in customers with celebrity-laden advertising campaigns, featuring actresses Joanna Lumley and Rosie Huntington-Whiteley and actor Ryan Reynolds, sales of general merchandise have fallen in the last year. Sales of its non-food products in the UK fell by 1.8pc last year.
Earlier this month Sainsbury’s posted a pre-tax profit of £714m and boasted a double-digit increase in its clothing sales, helped by its tie-up with Gok Wan, the television presenter who has designed a range of women’s fashion for the supermarket.