Marks & Spencer has said it will step up cost cuts in the year ahead despite increasing annual profits by a better-than-expected 41%.
Stuart Machin, the chief executive of the clothing, homeware and food retailer, said it was “at the beginnings of a new M&S” with “wind in our sails, and confidence that our plan is working” as pre-tax profits rose to £672.5m in the year to 30 March. Sales rose 9.4% to £13bn.
However, the leap in profits came after cost cuts including trimming the number of shop staff and lowering the cost of delivering food to its stores after buying its partner Gist.
M&S said it was bolstering its five-year plan for cost cuts by £100m to £500m by 2028 with increases in staff pay offset by “structural cost reductions and other efficiencies” – suggesting job cuts – while other cost inflation would be largely be offset by reduced energy costs.
Machin said M&S had increased its market share in clothing and homewares and was “confident we will make further progress” in a bullish prediction for the year ahead.
The upmarket grocer said it had benefited from a shift towards eating at home rather than at restaurants with sales of its “dine in” offer up by more than 40% while shoppers also spent 34% more on its lowest price Remarksable Value range.
Clothing and home sales increased 5.3%, helped by a 15% rise in sales of holiday wear such as swimsuits while sales of its more expensive Autograph range for men rose 15%.
M&S’s share of losses at Ocado Retail, its online grocery shopping joint venture, widened to £37.3m from £29.5m and M&S reiterated that it did not expect to have to pay a final instalment for its share in the business which was once expected to be £191m.
Sales at M&S’s international stores also slid by 1% at constant currency rates to £719m and Machin said this was now “resetting priorities” to step up progress.
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Clive Black, a retail analyst at M&S’s broker Shore Capital, said the retailer had “materially beaten market expectations” and he had upgraded his expectations for the year ahead by about 12%.
The group plans to open nine new food stores in the year ahead, up from eight last year, and up to four full-line clothing and home stores despite closing 12 outdated or misplaced stores in the past year.