LONDON -- Marks & Spencer (MKS -1.76%), the United Kingdom's clothing and home product retailer with 731 stores across the country, saw profit before tax fall 14% to £564.3 million for the year to March 30.
Group sales were up a modest 1.3% to £10 billion, with international and multichannel sales up 4.5% and 16.6%, respectively. The group's owned businesses in India and China provided a solid performance during the year, with good like-for-like growth and the opening of new space. The more significant U.K. sales were up 0.9% to £8.95 billion, although like-for-like sales actually fell by 1%.
U.K. operating costs were up 1.8% on the previous year. Efforts have been made to make the supply chain more efficient in order to offset the effect of inflation and the need for new space and customer service in stores. Underlying profit before tax fell from £705.9 million last year to £665.2 million. Underlying basic earnings per share dropped to 29.2 pence -- a 10% fall. The full-year dividend was held at 17 pence per share. In addition, the group's net debt rose from £1.9 billion to £2.6 billion.
Chief executive Marc Bolland said:
In a challenging market, M&S sales grew by 1.3%. Three of the four parts of the business made strong progress. ... We are working hard to get the General Merchandise performance back on track. 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 benefited 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.
Looking ahead to fiscal year 2014, Marks & Spencer is aiming for an improvement in underlying profit but does expect to incur additional costs related to the new Web platform. Operating costs are expected to increase by 3.5% due to inflation and the need for more space, and capital expenditure is expected to be £775 million. The group is addressing a sustained period of under-investment and expects to inject £550 million per year after FY2014.
Will this investment be enough to help Marks & Spencer survive the current trend of high-street retailers becoming ex-high-street retailers? Despite the company's woes, Marks & Spencer's share price is holding up well, up 4.6% as of 9 a.m. EDT today.
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