• FY pre-tax profit falls 3.9%
  • GM like-for-like sales down 1.4%
  • Total sales grow 2.7%
Earnings were dragged down by a decline in clothing sales

Earnings were dragged down by a decline in clothing sales

Marks & Spencer's general merchandise division performed worse than analysts expected in its full-year after the UK retailer this morning (20 May) revealed a drop in earnings dragged down by a decline in clothing sales.

Shares in Marks & Spencer fell nearly 3% in early morning trading after the retailer reported a fall in annual profits for the third year in a row.

Underlying profit before tax dropped 3.9% to GBP623m (US$1.05bn) for the year ended 29 March. Earnings were dragged down by a 1.4% drop in like-for-like merchandise sales, the majority of which is clothing. Chief executive Marc Bolland, however, said he was pleased to see early signs of improvement in the division.

In the last year the retailer has been busy refocusing its general merchandise business, with more of an emphasis on quality and style. It also launched M&S Collection and a Leading Ladies marketing campaign. The division returned to growth in the fourth quarter but has failed to perform as well as the group's food division, which saw sales grow 1.7% for the year.

Total UK gross margin was down 20bps at 40.6%, as a result of a decline in general merchandise gross margin and a mix change due to a difference in the rate of sales growth in the GM division and food.

Group sales, however, were up 2.7% at GBP10.3bn, while UK sales climbed 2.3%. International sales were up 6.2% and multi-channel sales grew 22.8%.

Chairman Robert Swannell, said: "The investment made in executing our strategy over the last three years puts M&S in a stronger position to compete in a retail world undergoing profound change. Our priorities now are to deliver on the investment we have made and to make M&S a more profitable, stronger and well-equipped business."

Bernstein Research analyst Jamie Merriman added: "While management's tone remains positive and confident in the transformation of the general merchandise division, we believe the stock reaction today will be driven by how much credit investors are willing to give M&S after another year of relatively weak results."

Marks & Spencer's share price was down 2.59% to 439.30 pence at 08.45 GMT today.