UPDATE 2-M&S shows pain of turnaround plan with 10% profit fall

Britain's Marks & Spencer reported a 10% fall in full-year profit, a third straight decline, showing the pain of its latest attempt at a multi-year turnaround, but said it was judging itself as much by the pace of change as by financial results.

Despite the profit fall, M&S said on Wednesday its "transformation plan" was on track and that it would accelerate change in the 2019-20 year. M&S set out on its latest turnaround plan, which follows a decade of failed reinventions, shortly after retail veteran Archie Norman joined as chairman in 2017 to work alongside Steve Rowe, who became chief executive in 2016 and has been with the company for almost three decades.

The 135-year-old group said in May last year it was targeting sustainable, profitable growth in three to five years by closing weaker stores, re-shaping its clothing and food businesses, cutting costs and overhauling technology. "At this stage we are judging ourselves as much by the pace of change as by the trading outcomes," said Rowe.

M&S made a pretax profit before one-off items of 523.2 million pounds ($664.4 million) in the year to March 31. That was slightly better than analysts' average forecast of 519 million pounds but down from 580.9 million pounds in 2017-18. A decade ago it made a profit of 1 billion pounds. Clothing and home like-for-like sales fell 1.3% in M&S's fourth quarter, while food sales were down 1.5% on the same basis. However, this year's later Easter hit like-for-like revenue in clothing and home by about 0.4% and food by 1.9%.

"Whilst there are green shoots, we have not been consistent in our delivery in a number of areas of the business," said Rowe. "M&S is changing faster than at any time in my career - substantial changes across the business to our processes, ranges and operations and this has constrained this year's performance, particularly in clothing & home," he said.

Total group revenue fell 3% in the year to 10.4 billion pounds. M&S wants to make at least a third of its clothing and home sales online by 2022 and as part of its transition struck a 1.5 billion pound online food joint venture with Ocado in February, giving it a home delivery service from September 2020 at the latest.

But the plans have yet to benefit its shares, which are down nearly a third over the past two years, once again putting M&S in danger of dropping out of the FTSE 100, of which it has been a member since the index began in 1984. M&S is financing the Ocado deal by raising 601 million pounds in a 1-for-5 rights issue at 185 pence a share, the terms of which were announced on Wednesday, as well as a 40% dividend cut, with a reduced final dividend for 2018-19 of 7.1 pence.

Its shares were down 4.5% at 259.1 pence in early trade, reflecting the discounted rights issue price. The group booked 438.6 million pounds in exceptional items, including 222.1 million for costs related to store closures. That meant its statutory pretax profit was 84.6 million pounds.

($1 = 0.7875 pounds) (Reporting by James Davey; Editing by Kate Holton and Mark Potter)