Marks & Spencer's (M&S) annual profits declined as the retailer's struggling general merchandise division continued to drag on a rise in food sales.
The UK company's underlying profit before tax for the year to March 30th came to £665.2m, a 5.8% fall from the previous year's £705.9m and in line with analysts' expectations.
Group revenue was broadly flat with meagre growth of 0.09% to £10bn, reflecting a 4.1% drop in like-for-like sales of general merchandise.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Get 6 issues free
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The slump in general merchandise, which includes clothing and shoes, failed to offset a 1.7% jump in like-for-like food sales.
Total UK like-for-like sales were down 1.0% while international sales grew 4.5% and multi-channel sales were up 16.6%.
Total UK gross margin was up 10 basis points (bps) at 40.9%.
Marc Bolland, who recently unveiled the group's new autumn/winter clothing range and his strategy to turn its fashion sales around, said three of the four parts of the business made strong progress.
"We are working hard to get the general merchandise performance back on track," he said.
"We have already made progress in our operational execution, and our new autumn/winter ranges have received a positive reaction.
"We are very pleased with food performance which benefitted from our continued focus on delivering innovation, and unrivalled quality and provenance. Our international operations performed well in key markets and our multi-channel business delivered strong growth."
M&S recommended a full-year dividend of 17p in line with the previous year's.
Net debt stood at £2.6bn, compared to a reported £1.9bn a year earlier (£2.5bn in 'pro-forma' terms), while capital expenditure rose to £829.7m from £720.7m as a result of ongoing investment in stores and the new multi-channel platform.
The group opened 45 new international stores and seven international websites in Europe and China during the year.
The firm expects capital expenditure to fall to £775m in the next fiscal year and to £550m in 2014/15.
Operating costs are anticipated to increase 3.5% next year as a result of inflation and volume growth, the addition of new space and increase in depreciation.
Gross margins are forecast to grow by 30bps to 50bps.
M&S is targeting underlying profit improvement in the 2013/14 fiscal year, but expects £30m of non-recurring dual running costs as a result of the transition to the new web platform and the opening of the new distribution centre in Castle Donington.
RD
Annual house price growth halves to 3.5% – ONS
Nationwide pays £100 to millions of people – have you received the payment?
