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M&S ramps up industrial activity as annual profits fall

M&S ramps up industrial activity as annual profits fall

Department store retailer M&S is embarking on a major turnaround programme, including transforming its industrial infrastructure as it announced a fall in both sales and profit in its annual results to the end of March.

The retailer is reducing the complexity of its logistics network, closing four distribution centres and warehouses and the impending opening a national distribution centre in Welham Green, due for launch in this summer. The new site, in partnership with DHL is currently now ramping up its boxed storage capacity. Over £14m was spent on project costs as well as redundancy and accelerated depreciation.

Its focus on industrial has undoubtedly increased, as it prepares to embark on a joint venture with Ocado and establish its presence in the food delivery market. M&S’ changes to its warehouse coverage meant was a major cause in a 4.9% jump in warehousing and distribution costs to £564.6m in the year to 31 March 2019. Logistics costs increased 1.9% from £13.1m to £14.3m over the period.

“The growth in distribution and warehousing costs was largely driven by inflation and the costs of channel shift, as well as costs associated with the closure of an equipment warehouse, with some offset achieved from improved efficiencies at Castle Donington,” the company stated in its results statement.

The company added it incurred costs totalling £14.3m, as it aims in converting to a single tier Clothing & Home UK distribution network, including the closure of two distribution centres sites. Its distribution of clothing & home products will be operated in Welham Green, which has seen supply chain expenditure at the site, and its other distribution site in Castle Donington, increase in the process.

M&S said it is working with Gist to provide its logistics capability. Meanwhile, M&S said it is making “good progress” restoring the basics of its technology organisation, transitioning to a partnership with TCS, in helping migrating its online platform to the cloud and rolling out new warehouse management software to enable the decommissioning of obsolete systems and the old mainframe base, which the company said will deliver annualised savings of over £30m.

“Creating a new range architecture in a business with weak processes, a slow supply chain and where buyers are building their confidence has proven challenging, and our sales both in store and online have been frustrated by poor availability in Q4,” M&S commented.

The company reported a drop in pre-tax profits of nearly 10% in the year to 31 March, at £523.2m. Like-for-like sales, which strip out the impact of new stores, were down by 2.9% for the group as a whole. The retailer, which has 1,043 stores, is part of the way though a big store closure programme, as it shifts its focus to the potential in the food delivery market.

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