Marks & Spencer chief executive Marc Bolland was cautiously optimistic yesterday that the high street stalwart had turned a corner towards recovery, as the retailer posted its first profit rise in four years.
The retailer, which has been battling to revive its clothing arm, reported a 6.1 per cent rise in pre-tax profits to £661.2m in the year to 28 March.
This beat analyst expectations of £642m of profits – but was still short of the £1bn profit it made in 2008.
It also raised its dividend 5.9 per cent to 18p and announced a £150m share buyback for investors who have had to wait patiently since the last buyback in 2007.
Speaking at the London Stock Exchange yesterday, Bolland said: “We knew where we were going and this is clearly a step by step approach and we have clearly made a step forward and clearly in the right direction.”
Revenue was flat at £10.3bn with a 0.6 per cent rise in like-for-like sales across its food division offset by a 3.1 per cent decline in underlying sales in general merchandise, which spans clothing, footwear and homeware.
However, fourth-quarter sales of general merchandise rose 0.7 per cent at stores open more than a year, representing the division’s first positive performance in 15 quarters.
The results are likely to come as a relief for the 56-year-old Dutchman, who has been under intense pressure to show that his overhaul of the retailer’s clothing business and its product range is bearing fruit.
When he took over as chief executive in 2010, Bolland set out ambitious targets to add more than £2.5bn of new sales. However, less that two years later that was scaled back to between £1.1bn and £1.7bn and then even those targets were missed, as Marks & Spencer reported its first annual profit fall in three years.
Bolland’s efforts to revive sales at its struggling clothing arm have come against a backdrop of billions of pounds of investment into revamping its website, shrinking its distribution network of 100 UK warehouses and overhauling its outdated IT systems.
Bolland said yesterday that it could have increased profits three years ago but the company had decided to invest over £1bn into its outdated legacy systems.
“If I had kicked that in the long grass and said: ‘You know what. Think about that in five years time,’ all that we would have made would be £100m extra profits,” he said.
The upturn in profits and recent improvement in the share price has sparked some people to question whether Bolland might take this opportunity to leave on a high note.
However, Bolland said he had no plans to leave any time soon, insisting he want to see his plans through and “absolutely” expected to be present at the results next year.
“I have enjoyed my time at this company and I am now enjoying the execution phase of the strategy,” he said.