Profit before tax for 2016/17 is down 64% to £176m, significantly impacted by the charges associated with closing the defined benefit pension scheme and the impact of international closures.
On an underlying basis, profits fell 10.3%, due to the expected decrease in Clothing & Home sales and the increased costs of new space, although the group has delivered a stronger gross margin than had been expected. The shares rose 2.2% after the announcement.
Full year results
Over the year, Clothing & Home revenues declined 2.8%, with like-for like sales down 3.4%. LFL sales fell 5.9% in the final quarter of the year, as the December sale and Easter both fell outside the period this year. Against a weak wider clothing market, M&S says its fourth quarter performance means its market share is now stabilising.
Gross margin was up c.105bps year-on-year, helped by a renegotiation of supplier contracts, and the decision to move business to lower duty locations. Margins were also boosted by a reduction in markdown activity, resulting in a 2.7% increase in full price sales.
In Food, like-for-like sales were down 2.1% in Q4, again impacted by the timing of Easter and the December sale. Gross margins dipped 0.25 percentage points, as a result of cost inflation.
Looking ahead, the group is set to open further Simply Food stores at a steady rate, with c.250 more stores planned by 2019/20. Cost inflation could impact margins by up to 0.5 percentage points next year.
M&S.com revenues increased by 4.9%, despite the removal of eight online cyber events.
While there is no repeat of recent special dividends this year, the ordinary full year dividend is held flat at 18.7p per share.
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