M&S struggle to see profits rise after exit from Russia plus cost pressures

Marks & Spencer branch in Ashford, Kent. Photo credit: Gareth Fuller/PA Wire

Marks & Spencer Group warned that the cost-of-living crisis and a full exit from Russia will prevent its profit from rising this year.

Sales growth will slow due to the squeeze on shoppers from the higher cost of living, the company said.

It’s taking a £31m (€36.3m) charge as it ends its franchise in Russia, which contributed £5.2m (€6.1m) to earnings last year.

This year M&S won’t get UK business tax relief and results will exclude Russia, the retailer said.

“Given the increasing cost pressures and consumer uncertainty, we do not currently expect to progress from this lower profit base,” the company said.

Chief executive officer Steve Rowe is handing over to his successor Stuart Machin and co-CEO Katie Bickerstaffe, who will have to navigate the cost-of-living crisis and steer the food and clothing retailer’s turnaround efforts after more than a decade of attempts to jumpstart the business.

Their biggest tasks will be to tackle M&S’s expensive store portfolio, boost online sales and stay competitive in clothing after being dismissed as old-fashioned, ill-fitting and pricey.

M&S, a stalwart of the British high street, suspended shipments to its franchisee in Russia in March after the outbreak of war in Ukraine, but Fiba Group kept open the 48 M&S stores it operates in the country.

The decision to fully exit the Russian franchise ends the public-relations headache for M&S as it was criticized for holding onto ties to the country after many companies had exited.

A household brand with hundreds of stores across the nation, M&S’s successive management teams have repeatedly failed to return the chain to prior levels of annual profit. M&S shares have lost two-thirds of their value since Rowe took over in 2016.

M&S’s international business ran into other difficulties last year as well with the retailer closing 11 of its franchise stores in France and removing fresh and chilled products from stores in Czech Republic due to supply difficulties after Brexit.

To see some of the struggles M&S faces, as well as some of the reasons shoppers come in, look no further than the four-story shop in Moorgate, City of London.

A tour before the earnings update was released found that the large ground floor, packed with colorful womenswear, accessories and shoes, had maybe a dozen shoppers and certainly no queue at the till.

Bloomberg