Marks & Spencer said it was facing a “building storm” with next year likely to be more challenging than this one after reporting an almost 24% drop in profits.
The clothing, food and home goods retailer said sales rose 8.8% to £5.6bn in the six months to October 1, but underlying pre-tax profits sank 23.7% to 205, £5m as its online grocery joint venture Ocado fell into the red and pulled out of Russia.
M&S said it was currently trading well, with clothing sales up 4.2%, food up 3% and international sales up 4.1%.
However, its chairman, Archie Norman, said “we are now in a period of consumer crisis” and there was also a “crisis in the cost of doing business” as rising wages, energy and transport costs hit profits. “We all need to run faster up the downward escalator,” he said in a presentation to investors.
The retailer said in a statement: “Across all M&S markets, conditions are very likely to become more challenging in [the next year]. However, the sweeping changes that have taken place over the last few years, together with a revamped product offering and strong value for money credentials, provide some insulation from the coming storm.”
Profits at M&S’s food business fell 42% as the company said it had not passed on the full effect of an 11% rise in the cost of its supplies, while food waste rose as demand changed over the summer. Sales at Ocado fell 4.2% to a £0.7m loss as shoppers returned to the high street.
Profits at clothing and home goods jumped by just over a third after sales rose 14% as shoppers returned to stores following last year’s restrictions on trade linked to the coronavirus pandemic. Sales of dresses jumped by 50% and men’s suits by more than half, while holiday wear was also popular as the UK returned to socializing and private events such as weddings and trips abroad.
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The retailer said last month it wanted to close 25% of its larger clothing and homeware stores while opening more than 100 new Simply Food stores, accelerating a turnaround plan in the face of a “difficult economic background’ and rising costs.
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