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M&S admits recovery has stalled despite expected results.

Marks & Spencer is to introduce a series of initiatives to cut costs further and boost sales after expressing disappointment with its year end performance.

The group yesterday conceded that its recovery had faltered, despite posting results broadly in line with market expectations.

But its shares were little moved as analysts questioned whether management was being sufficiently radical to stem the erosion of the group's market share in both clothing and food.

Although annual profits showed improvement, the bottom-line figure of pounds 781.6 million was still well short of the pounds 1.2 billion made in its heyday in 1998.

The 100-year-old firm said its pre-tax profit excluding exceptionals was pounds 763.2 million for the year to March, compared with restated profits of pounds 759.5 million a year ago.

M&S raised the dividend 9.5 per cent to 11.5 pence per share 'We are clearly under pressure to perform,' said chief executive Roger Holmes, whose own position is seen as vulnerable by analysts.

'We still have a lot to do but I am confident that we can succeed. Whilst we established new areas of growth in money and home this year, the initial surge in the recovery of our clothing and food business faltered.'

The group's core clothing business has failed to build on its 11 per cent market share for 15 months, having recaptured just one per cent of the three per cent it lost since 1998.

Analyst Matthew McEachran of Investec Securities said that while clothing sales trends should reverse later this year, speculation that food sales were deteriorating further would give cause for concern.

Efforts by M&S to win back clothing sales have included new appointments, the introduction of the Per Una range and most recently the teenage Per Una Due offering.

The group took on former Selfridges boss Vittorio Radice as executive director for general merchandising and later announced Asda's Kate Bostock as head of womenswear -the part of the business most under pressure.

Mr Holmes said last month that the full impact of any new appointments was unlikely to be seen until next spring.

M&S said it would continue to cut down on costs in its clothing supply chain and would pass this on in the form of lower prices.

This would involve directly sourcing its products from the manufacturers, reducing the need for third-party suppliers.

The group is currently in discussions with suppliers but would not elaborate on details.

A major launch this year will be the new Limited Collection, a range of formal clothing for women bridging the gap between formal and casual. Shares closed up 3 /4p at 280 1 /4p.
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Title Annotation:Business
Publication:The Birmingham Post (England)
Date:May 26, 2004
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