M&S Simply Food boosts profits
sales rise of 3.4 per cent for the year to April 1, supported by a
seven per cent growth in food sales as a yearlong supermarket
makeover pays off.
The firm, which saw profits nosedive at the turn of the millennium, is winning back market share in the food retail sector, as consumers switch on to its premium grocery offering.
The food division has enjoyed four consecutive quarters of strong like-for-like growth, with Q4 showing the largest rise of 5.6 per cent.
This was helped by store refits throughout 2005, and the introduction of the Simply Food concept to BP petrol forecourts, which tapped the lucrative convenience trend.
Full-year profits before tax are expected to be around £745m to £755m, taking into account a one-off £20m bonus to staff.
The company remains determined to fight its way back to the top of the retail ladder, and aims to invest in better buying strategies and improved supplier terms over the coming months.
Chief Executive Stuart Rose said in a statement: "We are pleased with the progress but there remains much to do.
"The trading environment remains difficult and we do not expect this to improve much in the next financial year. Progress will become more demanding as we start to come up against growth year on year."
Earlier this year Rose said food sales were bolstered by a successful TV advertising campaign highlighting the quality and innovation of its product range.
He dubbed 2005 "the year of the chocolate pudding" after the advert for its melting chocolate dessert resulted in a jump in sales.
According to the Institute of Grocery Distribution (IGD), operators such as Marks & Spencer will continue to perform strongly at the premium end of the market as they tap into new consumers' tendencies for high quality, higher value lines.
But the firm is likely to see operating costs rise to six or seven per cent over the next year, as it concentrates on integrating new retail space. And the completion of refurbishment plans started this financial year will result in accelerated asset depreciation of around £26m.
The firm is extending its Simply Food format with the £38m acquisition of 28 stores from Iceland announced in January.
The stores will reopen under the M&S banner between June and August, taking the total number of supermarkets and convenience stores to 171 throughout the UK.
