Fashion-to-foods giant Marks & Spencer's (MKS) annual figures have come in marginally ahead of consensus. Yet the shares are marked 7.25p (1.6%) lower to 443.75p as the retail bellwether warns its recent website revamp is crimping sales.

You can drill down into the finer details of the High Street titan's full-year results, although the key takeaway is a 4% taxable profits drop to £623 million for the year ended 29 March. This is the third consecutive year of decline under embattled CEO Marc Bolland's stewardship, below the £695.2 million profit posted by big rival Next (NXT) in March, albeit ahead of the £615 million expected by the Square Mile's retail scribes.


Web chart - M&S - May 14

Group sales were up 2.7% at £10.3 billion, driven by good performances in the food, international and multi-channel businesses. Within the mix, UK like-for-like sales crept 0.2% higher with the help of 1.7% growth in the flourishing food business, where M&S' focus on quality product has underpinned 18 consecutive quarters of like-for-like growth.

Food's nourishing performance compensated for a 1.4% decline in General Merchandise. Bolland, seeking to transform the traditional British retailer into a global, multi-channel force, remains under pressure to revamp performance in General Merchandise, principally womenswear clothing ranges which have failed to inspire for too long.

Bolland insists clothing sales have continued their improving trend 'in our stores', having returned to growth in the fourth quarter for the first time in three years. Removing some of the gloss however is news the relaunched M& 'will take four to six months to settle in and, as a consequence, will have some impact on General Merchandise performance in the first quarter.'

Disappointingly, it appears clothing and homewares sales have slowed following February's migration from a platform run by Amazon (AMZN:NDQ) to a new M&S-owned platform. Customers are still grappling with the new site which has yet to 'settle down technically' and as such, much hinges on the FTSE 100 giant's Q1 update (8 Jul).

Seasoned retail analyst Tony Shiret at Espirito Santo finds the results disappointing and likely to prompt downgrades to current year consensus. 'Overall numbers were slightly ahead of market consensus at £623m underlying profit (consensus £615m), but we expected firmer indications on capital repatriation, a better General Merchandise gross margin recovery than now indicated and we note the comments on online “settling” in the early year', he explains. Shiret also believes 'the comments on Online are worrying as we understand that the declines here have been material and we are not sure that this is just a natural settling down process or something more.'

Issue Date: 20 May 2014