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Store remains central to M&S multichannel plans

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Marks & Spencer today said it was making good progress in its three-year vision of becoming an international multichannel retailer – but revealed a 15% fall in profits and said future sales growth would not be as high as once hoped.

The news came as M&S today reported pre-tax profits down at £658.0m in the financial year to March 31, compared to last year’s £780.6m, as a result of the rising costs of raw materials and wages at a time when promotional activities are also up. Group sales rose by 2% to £9.9bn.

Multichannel sales,however, rose 18% to £559m, ahead of the online market as a whole. Online traffic was up by 11% to 3.4m visitors while M&S’ mobile site saw more than 300% growth in visits.

The retailer also said it would launch eight new international websites during the current financial year, that 40% of its Shop Your Way online purchases were now collected in store, and that it continued to pilot digital in-store initiatives including its Style Online e-boutique and new browse and order points to extend the aisle.

But it also updated its three-year ambition, set out in November 2010, of boosting annual revenues by between £1.5bn and £2.5bn to between £11.5bn and £12.5bn in the 2013/14 financial year. Instead, it said, it now expected to boost revenues by between £1.5bn and £1.7bn – at the lower end of its forecast. “We are making good progress,” the M&S annual statement said, “but successful execution of our strategy requires us to adapt to both market opportunities and current market conditions.

The original forecast envisaged multichannel sales of between £800m and £1bn and today the company said it was “on track to deliver” on its targets for both multichannel and international sales.

M&S said it saw a “significant acceleration in our online growth rate” between the first and second halves of the year thanks to improvements including the introduction of next-day delivery, the launch of the online discount Outlet store, which saw 1.1m visitors in its first six weeks, as well as online ordering for Christmas food, which produced a 22% rise in sales. Improvements to the website included enhanced search, zoom and video functionality.

The company said in the light of multichannel sales growth it had reviewed how much space it would need. Accordingly it would spend £200m less than previously forecast over the coming two years, growing its estate by 3% in the current year, and 2.5% next year. “Despite the growth in multichannel,” it said, “we believe that physical space will continue to play an important role, and will help us to deliver an improved Shop Your Way service for our customers.” That Shop your Way service means that 40% of orders are now collected in stores.

Its stores now include more technology with both its Style Online e-boutique and new browse and order points currently being trialled in stores. In some stores, it said, advisers are now equipped with iPads to provide “more personal assistance to customers”. In addition, a new store format for its home department that will include greater use of technology is to be introduced to its new Cheshire Oaks store in August.

Today’s results also showed UK total sales rose by 1.5% in the full-year and like-for-like sales by 0.3%. Growth was strong in the food category, where total sales rose by 3.9% but weakest in the home department, where total sales were down by 10% following the company’s move out of selling technology.

International sales rose by 5.8%, thanks to growth in the Indian, Chinese and Hong Kong markets. Trading conditions were weak in Greece and the Republic of Ireland. The company already has websites in Ireland and in France, and said plans to launch eight more over the year came as international deliveries from its UK website continued to grow. Some 37 new stores were opened overseas, taking its total stores to 387 in 43 countries. It now expects to open around 100 a year alongside “multiple country websites.”

Chief executive Marc Bolland said: “Whilst the economic environment has deteriorated since we first set out our strategic plans, we have made significant progress.

“We are well on track to become a truly international multi-channel retailer. By the end of this year we will be transacting from 10 websites worldwide and opening around 100 international stores per year.”

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