M&S distribution costs rise by 9%

Fashion and food retailer Marks and Spencer (M&S) distribution and warehousing costs increased by 9.3% to £519 million in 2016, driven mostly by increasing capacity to support growth.

M&S published its financial results for the year end 1st April, and highlighted the opening of a new Food depot in Enfield as well as a Clothing & Home warehouse in Bradford.

The omnichannel retailer said that the balance of the increased costs were largely attributable to increased food volumes and inflation.

Last September M&S set out plans to reduce the numbers of staff permanently based in central London by around 400 in logistics and IT as part of a restructuring of its head office functions.

In its results, M&S said: “As expected, around half of the anticipated c.£30m cost savings from our Head Office restructuring were delivered during the year.”

“Overall, central costs increased by £41m. This was largely driven by an increase in IT related operating costs including higher depreciation from new merchandising systems. A greater proportion of costs are now being expensed as we transition to increased use of cloud based software services.”

Food was again the strongest segment of the M&S business growing by 4.2 per cent – although like-for-like sales were down 0.8 per cent. Clothing & Home sales were down 2.8 per cent, like-for-like sales were down 3.4 per cent.

Total group revenue was up 0.6 per cent to £10.6 billion, while adjusted operating profit was down 11.2 per cent at £691m. However, after adjusted items, pre-tax profit was down 64 per cent at £176m.

Chief executive Steve Rowe said: “As we anticipated, the planned restructuring of M&S has come with a cost and has impacted profits, but the business is still strongly cash generative and we reduced our net debt.”  
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