Marks & Spencer share price: 3 things we learnt from its annual results

The British retailer saw its annual sales and profits fall, but the company looks to rectify the situation over the next 12 months by pressing forward with its ‘digital first’ strategy while maintaining its high street presence.

Marks & Spencer Source: Bloomberg

Marks & Spencer (M&S) had a bad end to the financial year in March, with the British retailer recording a significant slide in sales and profits in its annual results.

Its full-year figures showed underlying pre-tax profits at M&S fell by 10% to £532.2 million with total revenues falling by 3.6%, driven by a string of store closures as the retailer looks to close more than 100 underperforming sites as part of its digital first strategy and cost-cutting programme.

Lacklustre results prompt further store closures

Its disappointing set of full-year results forced M&S to increase the number of store closures its plans to make as part of its digital first strategy from 100 to 120 by 2023.

However, the retailer has promised investors that despite its eagerness to press on with its digital first plans, it will continue to maintain a strong presence on the high street.

Investors vent frustrations with Ocado deal

In February M&S signed a £750 million deal with Ocado to secure home deliveries of its food for the first time, helping the company enter a extremely profitable and competitive part of the retail market.

However, investors were quick to vent their frustrations with how the deal was funded, with M&S financing the joint venture primarily through a rights issue, diluting existing shareholders holdings in the company.

The sale of new share will raise over £600 million, with each rights issue share being sold at a 32% discount, according to a report by Sky News earlier this week.

M&S cuts its dividend to cut costs

Another announcement that was sure to upset shareholders was the retailer’s decision to slash its dividend, with the company’s management reducing the payout to 13.9p a share, representing a 26% decrease over last year.

M&S blamed the dividend cut on a need to cut costs as the company attempts to transform the business and reposition it to more effectively compete with its rivals.

‘M&S is changing faster than at any time in my career - substantial changes across the business to our processes, ranges and operations - and this has constrained this year's performance, particularly in clothing and home,’ M&S CEO Steve Rowe said.

‘However, we remain on track with our transformation and are now well on the road to making M&S special again,’ he added.


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