Despite a high profile advertising campaign featuring Hollywood superstars, pop stars and models, younger shoppers are ditching M&S for cheaper fast fashion rivals such as Primark, Topshop, Zara and H&M.
Underlying pre-tax profits fell four per cent to £623m in the year to March 29 with general merchandise, which includes clothing, reporting a 1.4 per cent fall in like-for-like sales.
M&S has seen its earnings overtaken by 32-year-old upstart Next, which earlier this year reported full-year profits of £695m.
M&S’s chief executive Marc Bolland, the former Morrisons boss, said general merchandise is showing “early signs of improvement”, with investment being ploughed in to transform the business. Mr Bolland said targets had not been reached because “general merchandise has not improved enough”, but he defended his record amid the sluggish performance of the wider UK economy.
He said that “more needed to be done than I thought at the time” to overhaul the business.
The general merchandise division, made up of clothing, footwear and homewares, has posted 11 consecutive quarters of underlying sales declines.
But M&S said an improvement in clothing sales in the fourth quarter has continued in its stores.
On a brighter note like-for-like food sales improved by 1.7 per cent.
The group’s profits have been propped up by 18 straight quarters of growth at M&S’s food business.
Looking ahead, the group warned that a new website will take four to six months to settle in, which will affect the performance of its general merchandise business in the three months to the end of June.
When asked about the website, chief financial officer Alan Stewart said: “Nothing’s gone wrong.”
Mr Bolland has spent £2.3bn in the last three years to push through changes and address decades of under-investment.
Full-year sales of £10.3bn, which were up 2.7 per cent on last year, were well below a revised target that Mr Bolland set in 2012 of £10.8bn to £11.5bn.
When quizzed, he declined to give himself a score out of 10 for his performance since becoming chief executive, saying: “We don’t give ourselves a rating on that.”
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said: “The wait for a material turnaround at M&S continues.
“A third consecutive annual decline in profits has been reported, whilst profit guidance for the year ahead is marginally disappointing, hit by the recent launch of its new web- site.
“On the upside, the food business continues to make progress, supported by the trend for battled consumers to reward themselves with premium foods and same store clothing sales returned to growth in the fourth quarter for the first time in three years.”