Profits and sales tumble at M&S

Total sales fell by nearly 5%

Marks & Spencer saw its profits fall by almost a fifth last year and has admitted that the outlook for the business remains "challenging".

The retailer's annual pre-tax pre-exceptional profits fell 19% to �618.5m ($1.13bn) from �805m last year.

M&S gave no update on current trading amid media reports that sales have fallen steeply in recent weeks.

Chief executive Stuart Rose said conditions were tough but insisted the company was "on track".

Lost status

Clearly we would like to do better Stuart Rose, M&S chief executive Check M&S's share price M&S recovery proves elusive Stuart Rose interview

Marks & Spencer has been struggling to regain its long-held status as a retail icon catering to the shopping needs of an entire family.

It has lost sales to competitors in recent times as its clothes were seen as increasingly old-fashioned and unexciting.

"Clearly we would like to do better," Mr Rose told the BBC.

"Clearly it is tough. The economic climate has turned out to be tougher than we forecast but we are on track."

Mr Rose, who was appointed last summer, said the fall in profits was largely due to heavy price cutting over the past 12 months to clear excess stock.

He emphasised that the past year had been spent refocusing the business on its core strengths of product quality and value for money and improving its efficiency rather than on driving sales.

"I believe we have the foundations in place to drive the business forward."

However, despite extensive changes to its core womenswear range, an apparent failure to broaden the appeal of much of its fashion remains a persistent problem.

Tough climate

In the 52 weeks to 2 April, M&S's total sales fell to �7.9bn from �8.3bn for the corresponding period last year.

UK retail sales fell 1.7% to �7bn while like-for-like sales - which exclude sales from new store openings - were down 5.1% over the period.

Clothing sales fell 3.1% with womenswear performing particularly poorly.

Sales of womenswear continue to be disappointing

Food sales did marginally better, rising 2.4%. However, on a like for like basis, sales were 2.6% lower than last year.

Initiatives planned for this year include the roll-out of an updated store design, trialled last year, to a further 20 stores.

The company plans to open about ten stores in out-of-town retail parks.

It has also agreed a deal with BP to open Simply Food outlets at a number of BP petrol stations.

Turbulent year

Marks & Spencer seemed to turn the corner between 2001 and 2003 when former chairman Luc Vandevelde oversaw three consecutive years of profit growth.

However, the company has endured a turbulent 12 months following Mr Vandevelde's departure in May 2004 and a protracted battle to fend off a �9.1bn bid from retail tycoon Philip Green.

M&S shares closed 5.25 pence, or 1.56%, higher to 342.25p as investors responded to the fact that profits, although well down on last year, were in line with market forecasts.

But its shares are trailing well below 400p, the amount that Mr Green was prepared to offer investors.

Analysts expressed concern about the current state of trading.

Richard Ratner, head of equity research at stockbrokers Seymour Pierce, said he believed M&S's sales in the financial year to date were about 9% lower than last year.

"Most of the multiples have done badly but not nearly as badly as Marks & Spencer," he told the BBC.

M&S will update investors on current trading at its annual general meeting in July.

"We would imagine that any relief today on the absence of bad news may be counterbalanced by nervousness over first quarter trading," stockbrokers Cazenove said.

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