Marks & Spencer (M&S) has announced a 34 per cent drop in half-year profits and plans to significantly reduce costs to regain its competitiveness on the high street.
Pre-tax profits in the six months to September 27 fell by £154 million to £297.8m, with like-for-like sales of food over the period down 5.3 per cent.
Executive chairman Sir Stuart Rose described market conditions as volatile and said M&S is facing the most difficult period on the high street since the early 1990s. He gave a cautious outlook for the rest of the year, and said he and his team are developing plans for a cost cutting programme for 2009-2010, to offset underlying cost price inflation across the business.
Sir Stuart said: “The economic environment has changed dramatically and we are now facing the most difficult retail conditions since the early 1990s.
“Our plan is to manage the business through the economic downturn by tightly controlling costs, capital expenditure, cash flow and stock. We are confident we have the right plan to bring M&S through these difficult times.”
He said it is unlikely there will be any improvement on the high street until 2010.
“If the government or the Bank of England reduce interest rates this Thursday - and I think there’s a very high likelihood that they will - and more importantly, if the banks themselves reduce the inter-banking rate - in other words, lend each other money at a cheaper rate - then some of that will filter through in terms of consumer confidence to the UK consumer.
"Maybe at the back end of 2009 we’ll see blue skies."
M&S has continued to hold its own in the clothing market, but seen its share of UK grocery sales eroded in the face of strong competition from the major supermarkets. Sir Stuart said recent price-cutting measures are aimed at helping the consumer: "In the current market customers are increasingly concerned about value and we know that we have to respond accordingly. This investment has made us more competitive and customers are starting to respond positively," he said.
