M&S struggling as Primark soars

published 7 November 2008

Marks and Spencer (LON:MKS) was shown up by a discount retailer this week as profits at Stuart Rose's outfit slumped by more than a third in the six months to September, just as Primark announced it was thriving during the credit crunch. Underlying sales at the value fashion chain grew by 4% in the year to September. At M&S, like-for-like clothing and homewares sales slid by 6.5%, while food was down 5%. "M&S seems incapable of bucking the market," said Nils Pratley in The Guardian. Jobs will have to go and the company faces hacking 20% out of its marketing budget. Rose must wish he had bowed out earlier this year when he had the chance, said The Independent's Jeremy Warner. Now he is at the helm as the ship sails into a brutal "recessionary storm" and people are again wondering "whether he's actually any good".

Still, while the outlook is hardly auspicious, there is "nothing terminal" about it, said Warner. M&S is in a good position to survive this crisis, agreed Damien Reece in The Daily Telegraph. Debt is more than manageable and the company has good cash flow. Yes, Primark is winning customers from the firm and the dividend may well be cut over the next year, but "there will be a business left for recovery". And bear in mind "how it might eventually fare on a high street where plenty of other names will disappear".