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Marks & Spencer Shares Plummet Amidst Warning of Decline in Sales

Strategic Insights

— 1 min read

Marks & Spencer shares suffered a significant decline, with a 45p drop to 404p, the lowest level since March 1995 and 40% below their peak from the previous year. The company has reported a 23% drop in first-half profits and warned that sales had "fallen off a cliff" in September and October. Sir Richard Greenbury, chairman and chief executive, has revealed that the company will be cutting back on expansion plans, trimming its three-year investment plan to £1.8 billion, and postponing store openings in China, Japan, and Australia.

Key Takeaways:

  • Marks & Spencer reported a 23% drop in first-half profits, with a pre-tax loss of £348 million compared to £452 million in the previous year.
  • The company warned that sales had declined significantly in September and October, with a potential loss of a quarter point in the past few weeks.
  • Trade in the UK began well but then deteriorated over the summer, particularly in clothing and furniture, and has since worsened.
  • The company plans to cut some clothing prices permanently and is running a large mid-season sale, with the possibility of a "massive January sale" if trade continues to worsen ahead of Christmas.
  • Marks & Spencer accounts for about 16% of the UK clothing market and usually achieves up to 40% of its sales during Christmas.
  • Sir Richard Greenbury has revealed that the company will be reviewing its business structure, which may lead to board changes, and is expected to be finished early next year.
  • The company has postponed store openings in China, Japan, and Australia, and will cut the size of some of its Far Eastern stores.
  • Marks & Spencer has made 50 people redundant in Hong Kong and returned 11 expatriate staff to the UK.

Statistics:

  • Marks & Spencer shares dropped by 45p to 404p on the stock market.
  • The company's pre-tax profit for the year to September 26 was £348 million, compared to £452 million a year ago.
  • The company's forecasts for the full year have been chopped by more than £100 million to £850 million to £860 million.
  • The company's underlying operating profits are expected to fall by a similar amount in the second half.
  • Marks & Spencer's three-year investment plan has been trimmed to £1.8 billion.

Sources:

  • The Times, "Marks & Spencer warning on profits", 1998.

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