According to the firm's latest trading update, pre-tax profit fell 18.5% to £488.8m.
Although M&S reported group revenue had increased by 2.4% to £10.6bn in the 53 weeks to 2 April 2016, the retailer said the disappointing performance of its Clothing & Home business divisions and difficult international trading conditions were continuing to hold the company back.
Wednesday’s trading update once again revealed that the retailer’s Clothing & Home revenue was lagging, falling by 2.2% from the previous year and generating like-for-like sales that were 2.9% lower than the rest of the market.
Meanwhile, the underlying operating profit of M&S’s international business was £58.2m, down 36.9% from last year. In the UK, however, the retailer’s underlying operating profit increased by 8.4% to £726.7m.
The performance of M&S’s food division was the one silver lining with a 3.6% growth in revenue from the previous year and like-for-like sales that outperformed the market by 0.2%.
Despite this, The Share Centre said investors are still ultimately disappointed with the reatiler's results.
"The continued underperformance of its non-food products will be one of the key concerns for investors, and the management has acknowledged that this was unsatisfactory,” said The Share Centre research analyst, Helal Miah.
He added: “New CEO Steve Rowe looks to be tackling some of these issues head on, stating that he wants to ‘re-establish style authority’, lower prices and reduce promotions, while focusing on improving fashion range and availability. But investors will point out that these are all issues that previous CEOs have aimed at fixing.”
M&S chief executive, Steve Rowe, conceded the company’s mixed results last year were “not satisfactory” but that M&S would “strive to deliver profitable sales growth” and improve for customers, employees and shareholders.
The company’s recovery actions “combined with the difficult trading conditions, will have an adverse effect on profit in the short term,” Rowe cautioned. “We are, however, confident that our commitment to delivering the right product, price and service will help return Clothing & Home sales to growth. This, together with continued momentum in Food, will provide us with a solid base from which to build a long term sustainable business."
M&S chairman, Robert Swannell, announced a proposed final dividend for 2015/2016 of 11.9p raising the full year dividend by 3.9% from the previous year to 18.7p.
Canaccord Genuity Wealth Management flagged M&S as one of several ‘cherished holdings’ that investors would be wise to consider excluding from their portfolios. Canaccord also stressed the minute amount that management had achieved over the last decade.
“During this period M&S has undergone several capital expenditure programmes, repeatedly re-launched and revamped their underwhelming clothing line and lurched from one restructuring plan to another - their latest iteration (from 2010), was to turn M&S into an ‘international multi-channel retailer’. But analyst consensus estimates for 2016 pre-tax profit are actually lower than the level achieved in 2004.”
“It’s not all bad news," according to Miah. "The food business continues to do very well as 75 new Simply Food stores were opened, while investors have enjoyed a good dividend supported by a share buyback programme."
“While today’s results are disappointing, we continue with our medium risk ‘buy’ recommendation. The dividend income stream is good and the lower price point looks attractive for the patient contrarian investor,” he added.