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Tuesday, November 2, 1999 Published at 08:28 GMT


Business: The Company File

M&S profits plummet

M&S hopes new clothing ranges will help reverse the slump

Profits at high street giant Marks & Spencer have suffered a fresh nosedive, plunging by nearly half in one year.


The BBC's Denise Mahoney: "Shoppers still don't want what Marks has to offer"
The UK's biggest clothes retailer - which has been suffering a slump for two years - has said profits in the six months to 25 September fell by 44%.

At the same time, anger is growing over the company's plans to switch to overseas suppliers in an attempt to cut costs.

M&S's total profits slumped from £337.4m in the same period last year to £192.8m. Sales were down 8%, with the clothing range doing particularly badly.

The company also issued a warning that trading continues to be difficult.

But bosses unveiled a series of measures aimed at improving its performance, including the acceptance of credit cards from next spring.

It is also planning to sell goods directly online in time for Christmas.

A restructuring of its buying and distribution methods is expected to bring in savings of £450m a year by 2002, and £400m is to be raised by the sale of non-trading property.

M&S said its profits had been hit by the cost of redundancies here and abroad announced earlier this year. After redundancy costs, profits fell to £114m.

It said its performance was improving, and that sales in October were at the same level as last year.

Strong brand


Peter Salsbury: "We will save money by reviewing the way we buy our products"
M&S chief executive Peter Salsbury said: "The initiatives to drive change are beginning to create a more flexible, responsive and customer related operation.

"Market research shows that the Marks & Spencer brand remains one of the strongest in the UK and that recent customer feedback on quality, value and service have all improved."


[ image: M&S stores will accept credit cards from the spring]
M&S stores will accept credit cards from the spring
Savings from the restructuring of its supply chain, which last month saw plans to sever ties with underwear maker Baird Clothing and the possible loss of 8,000 jobs, are to be ploughed back into the business to bring lower prices.

The profits figures came as staff at Baird announced plans to lobby M&S management over its plans to terminate the 30-year-old supply arrangement.

Betrayal

The GMB union has said most goods sold by M&S will soon be made abroad if the decision to end the Baird contract is not reversed.

The union says M&S is betraying British suppliers, and that it will be producing just 44% of its goods in Britain.


The BBC's Virginia Eastman: " Its share price has halved in value"
Des Farrell, the GMB's National Secretary for clothing, said: "It seems they are now prepared to dispense with the loyalty of both staff and their customers in a desperate bid to drive down costs.

"Everyone is aware of the difficulties facing the company, but sacking thousands of workers, gambling with the quality of the product and destroying a lifetime reputation for backing British suppliers is no way to build a foundation for recovery."

Some 27,000 jobs have been axed at firms supplying M&S in recent years, said the GMB.

That'll do nicely

M&S has finally conceded over its hostility to credit cards and said it would accept them from next spring in an attempt to reverse the sales slump.

M&S chiefs had always refused to take them, insisting instead on taking only their own store card, debit cards or cheques. They objected to the percentage of the sale price creamed off by the credit card companies.

But as the decline in sales continues, they have been looking for ways of wooing customers back.

Last month, the rival department store, John Lewis, bowed to modern technology and started accepting Visa and Mastercard.

The company's shares are less than half their 1997 value now.

Observers will be keenly watching to see whether the major changes will restore M&S fortunes and bring shoppers back.

The latest figures have also sparked speculation that the chain could become a takeover target.

One said: "I wouldn't be surprised if someone was casting an eye over the company."



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