Missing the Marks

By: Leonie Barrie - 20 May 2008 17:09

Even though Marks & Spencer’s CEO Sir Stuart Rose has steered the retailer back to the GBP1bn annual profit benchmark last achieved more than ten years ago when Sir Richard Greenbury was still at the helm, the seemingly buoyant full-year results are overshadowed by worries about a difficult future.

Instead of focusing on the retailer’s record profits, industry observers are more concerned instead with lower like-for-like sales in the fourth quarter, missed internal bonus targets and difficult trading at the start of its current financial year.

There are some who believe profit was inflated by the bonus cuts, which is going to make it hard to put in a repeat performance this year. And others fear the retailer’s focus on short-term measures like cutting prices – particularly in its clothing lines – to maintain market share will do nothing to shore up the desirability of the retailer’s range in the long term. Revenue from general merchandise, including garments, fell 3.1% at stores open at least a year in the fourth quarter.

The City fell out of love with M&S after it delivered a disappointing Christmas trading update, and it seems it will take more than record profits to put it back in favour again. The next year or so will be testing, to say the least.

FY profit at M&S breaks through GBP1bn barrier