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Tuesday, 23 May, 2000, 08:14 GMT 09:14 UK
M&S confirms gloom
Luc Vandevelde and Peter Salsbury
The new M&S chairman, left, with chief exec Peter Salsbury
Marks and Spencer has cut its dividend for the first time after another plunge in profits.

The company has suffered a sharp fall in profits, prestige and patronage in recent years, and its share price had reached a 10-year low.

Marks and Spencer made a profit of 517m in the past year, compared with 546m last time and nearly 1bn in the year before that, on an equivalent basis.

The final dividend has been cut in half, from 10p to 5.3p.

We cannot compromise our future investment capacity

Luc Vandevelde, M&S Chairman
The new M&S chairman, Luc Vandevelde, who was formerly with French supermarket chain Promodes, is keen on drawing a line under the losses and wants to focus on his plans for reviving the brand. .

"We cannot compromise our future investment capacity," Mr Vandevelde said.

"I would ask shareholders to accept our current financial performance and recognise that this affects our dividend payout. I am not ignoring the past but we need to be realistic about today," he added.

Clothing still in trouble

M&S changed the basis of its financial year, adding another week to include the late Easter. On that basis, profits were 557m.

Sales were down 7% for the year, but up 2.1% on a like-for-like basis in the first eight weeks of the new financial year in April and May.

Although sales of food and financial services have held up reasonably well, the continuing decline in sales of clothing is the main cause of the company's problems.

The head of the womenswear division, Barry Morris, has resigned from the board.

"The turnaround story for M&S has to be in clothing, where it continues to lose market share, even against weak comparisons," said one analyst.

Despite dropping the St. Michael brand and launching new fashion lines developed by top designers, M&S is still under threat from the growth of discount retailers like Matalan, and is also losing market share to branded clothing.

It finally introduced credit card sales in the past year.

Marks and Spencer's share price had reached a ten-year low of 220p, disappointing its army of investors.

The shares rose after the results were published, rising to 239p in early trading on the London stock market, but far below the price of more than 660p a few years ago.

Union anger

Marks and Spencer has put the squeeze on its UK clothing suppliers in an attempt to cut costs, and shifted much of its purchasing overseas.

This has caused hundreds of job losses and has angered some unions.

John Edmunds, the head of the GMB union, has called for an investigation of M&S by the Office of Fair Trading, saying that the company has abused its market position.

"Their practices are both anti-competitive and anti-social and should cease forthwith," he said.

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See also:

24 Jan 00 | Business
Belgian set to shake up M&S
22 Mar 00 | Business
M&S unveils new look
12 Mar 00 | Business
M&S drops St Michael
26 Mar 00 | Business
M&S buys into online lingerie
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