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Warm weather melts M&S
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September 27, 1999: 4:15 a.m. ET
Struggling retailer sees first-half profit almost halving, blames warm weather
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LONDON (CNNfn) - Marks & Spencer, Britain's largest clothing retailer, warned Monday that sluggish September sales are likely to result in disappointing first-half profits, dealing a further setback to the company's drive to revamp its sagging image at home and abroad.
The retailer, whose 480 signature food-and-clothing stores in Britain are known simply as 'M&S', said it expected first-half profit, before exceptional items, to be in a range of 185 to 195 million pounds ($304 million to $320 million).
M&S blamed "exceptionally warm weather" during the early weeks of September for driving a hole in expected sales of its heavily marketed autumn clothing range. The company admitted that September revenues normally make up a disproportionate amount of half-yearly revenue.
Even assuming profits come in at the upper end of the range, the projected figure would mark a 44 percent decline from pretax profit of 348.2 million pounds in the comparable period a year ago.
Marks & Spencer also said U.K. same-store sales declined 7.8 percent in the 26 weeks through September 25.
M&S, a longtime standard-bearer in the British market for mid-priced clothing, food and household items is in the midst of a major restructuring aimed at ensuring the company isn't left behind in the accelerating consolidation of the European retail sector.
As part of its international makeover, the company earlier this month announced plans to dispose of its 25 Kings Super Markets stores in the United States, while retaining its classic menswear retailer, Brooks Brothers.
At home, the company has mounted an aggressive drive to boost slumping sales by spending more on marketing and store revamps.
Last January, M&S blamed "significantly lower" Christmas sales for puncturing yearly earnings, which collapsed 40 percent from their levels in 1997. The company attributed the problem to overbuying of stock in the spring of 1998, leading to bloated inventories in the holiday season.
In February, M&S enacted a major boardroom shake-up, axing 31 top executives and taking a $16 million one-off charge.
Since then, the pressure has ratcheted up amid news of major tie-ups in the European retail sector, flagged by the imminent arrival of U.S. juggernaut Wal-Mart (WMT), which promises a further shake-out in the sector.
M&S (MKS) shares were up nearly 5 percent in London Monday at 315 pence.
The company will announce first-half earnings on November 2.
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Marks & Spencer
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