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Marks & Spencer slashed its dividend by a third today after a slump in annual profits which left executive chairman Sir Stuart Rose short on optimism.
Investors headed for the exit in light of the numbers, taking advantage of a recent bump in the share price to cash out. The stock lost 29¼p to 310p, the biggest faller in the Footsie.
Sir Stuart blamed fears of another bank crisis for shoppers' reluctance to open purses. "We are not in green shoots mode yet," he said.
Today he unveiled profits for the year to the end of March of £604 million - a slump from last year's £1 billion.
The dividend is cut to 15p a share, which Rose said was simply "common sense" and "tough but necessary".
The cut will anger M&S's legion of small shareholders but is not as brutal as some analysts expected.
Like-for-like sales - the most closely watched measure of success because it strips out new store space - fell 5.9% in the year. Food sales are also still falling, down 5%.
The results show that in two M&S strongholds - women's clothing and food - the chain has failed to make the breakthrough it had been hoping for.
M&S said it had been a "challenging year" for womenswear and revealed that its share of food sales had fallen from 4% to 3.9% despite the "Dine in for two for £10" deal.
Nick Bubb of Pali International said: "Overall it looks a bit underwhelming."
The normally ebullient Rose warned that the best that could be said on current trading "is that it hasn't got any worse". He added: "I am cautiously optimistic but there are two parts to the economy.
"On the one hand the consumer is fed up with being fed up, they want to spend. But on the banking side we don't know if there is anything around the corner that might disturb things."
Group sales last year rose 0.4% to £9.1 billion but fell in the UK by 1.7% overall.
The grim set of figures came in the week when M&S was celebrating its 125th anniversary and was accompanied by news of another boardroom upheaval.
Carl Leaver, head of M&S's overseas branches, whom many analysts had seen as a potential successor to Rose, has quit.
He was one of four internal candidates, the other three being finance director Ian Dyson, marketing boss Steven Sharp and womenswear head Kate Bostock.
Nick Bubb of Pali International says Dyson now looks like the number two at the company after being put in charge of a "2020" committee aimed at providing what Rose calls a "step change" in customer service.
Leaver's departure comes less than a year after Rose fired Steve Esom - another possible replacement - as head of food.
Marks & Spencer critics asked why Rose, who arrived in 2004 to fend off a takeover bid from Sir Philip Green, was still talking about the need for radical surgery after five years in charge.
Rose answered: "When I came here we had to do a root and branch recovery. We had to change the culture. It is five years into the journey."
City united in advice to clients: sell your shares
Shares in Marks and Spencer tumbled 9% this afternoon as City analysts got their teeth stuck in to Sir Stuart Rose's numbers. Their advice to investors on what to do with their M&S shareholdings did not make pretty reading:
Citigroup: reduce - Profits came in £11 million shy of our forecasts of £615 million, with the primary shortfall coming from the shortfall in underlying profits at the International division.
Virtually all the guidance on profits we were given in March is a little below previous forecasts - gross margins, costs, capital expenditure, space and pension finance income.
However, we still expect improved like-for-like sales and lower interest charges so have increased our pre-tax profit forecasts for the current year to £524 million from £482 million.
Numis: reduce - even factoring in our expectations that like-for-like sales will improve and the interest charge will decrease, we still think M&S shares are trading at a premium to the sector which is undeserved.
KBC: take profits - The final dividend has been cut, although less than expected. But at current levels, M&S shares are factoring in too much potential for recovery.
Recent trading conditions have improved for clothing retailers and M&S does have a growing international business, but we prefer Next and Debenhams for exposure to the sector.
International boss's departure says it all
On the face of it, M&S's international arm is one of the few bright spots of a downbeat results statement.
Sales are up 26%, and the group insists it is on track to make this business account for between 15% and 20% of its revenues by 2012.
But on Sir Stuart Rose's favourite measure of success - sales for vanity and profits for sanity, as he likes to say - the international arm is sluggish.
Profits were flat at £116.1 million, not a conspicuous success.
House broker Citigroup says this is £9 million lower than it was expecting.
M&S says it is "encouraged" by trading at the new Shanghai store, but its opening was not regarded as strong indeed, some said the first day was a shambles.
All of which may explain why Carl Leaver will shortly be leaving.
The company says it regrets his departure, which comes "by mutual agreement".
A new head of the international business will be appointed shortly.
Reader views (2)
Investors and shareholders are like Bankers; they don’t mind high profits in the good times, but hate losing a penny or two in the bad times.
As Harold Wilson once said; the stock market is a rich mans betting shop; nothing more.
But the tax payer will always prop up lame ducks; that is the difference between the tax paying workers, and the elite; one has morals and principles, the other has none at all.
- Mickyinlondon, london, 19/05/2009 15:57
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Another one bites the dust!
Almost every capable, experienced M&S Senior Exec has gone from the company since Stuat Rose took over. Virtually all that's left are Rose appointees and 'Yes Men'.
In my opinion there's far too many managers that are simply not up to the job. Staff morale is at an all time low and many staff have simply had enough or are disillusioned with the company management. The last internal staff survey results were absolutely terrible.
Instead of dabbling with low profit white goods and things like energy, they should sort out the core problems.
Why do they keep on trialling selling branded goods in Food. It didn't work in the North East and won't work in the rest of the country.
What has happened over the last 5 years is shocking!
- Insider At Marks, London, 19/05/2009 12:05
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