Marks and Spencer is expected to announce a 4% year-on-year increase in pre-tax profits when it unveils its full-year results tomorrow (22 May).
Consensus estimates suggest that profits will total in the region of GBP625m (US$898.4m), up from GBP604.4m last year.
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In April, M&S provided pre-tax profit guidance of GBP620-630m when it delivered a 4.8% increase in UK fourth-quarter sales.
However, the bastion of the UK high street has been battered by the downturn and the company has not been able to return profitability to the level seen two years ago, when it posted profits in excess of GBP1bn.
The results are the last to be delivered under outgoing chairman Sir Stuart Rose and change at the top has raised City hopes that M&S will reassess its strategic direction.
Rose is planning to leave the business in March but has indicated that he could depart before that date. He was chief executive from 2004 until 2008, when he became executive chairman. In May, Rose became chairman after ex-Morrisons boss Marc Bolland formally became chief executive.
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By GlobalDataIn a note to investors, analysts at Investec outlined a “manifesto” of “radical” changes that they argue are necessary to revitalise the group and provide stable profits.
The analysts call on Bolland to act on a five-point plan in order break the “boom and bust” cycle that caused profits to drop steeply with the onset of the economic downturn.
According to Investec, M&S should raise equity through a GBP700m rights issue to reduce debt and fund investment. The group should also restructure its property portfolio, improve supply chain efficiency, develop an online food offering and increase its in-store focus on food.
The analysts suggested that M&S should transition into a fully-fledged grocer to see off the likes of Waitrose – converting 200 high street outlets into supermarkets and stocking branded products.
M&S could also join forces with Ocado to develop an online food business, where the retailer’s “premium convenience food offer” could benefit from “less price-sensitive consumers”.
A number of challenges lie ahead for Bolland if he is to revitalise M&S’s lacklustre sales and profits trends. However, while the market is clearly expecting to see some big changes ushered in under the former Morrisons CEO, it seems unlikely that the company will show its hand tomorrow.
