New M&S Boss Sets Out Price Cutting Plan

New Marks & Spencer's boss Steve Rowe has pledged to cut prices and put more staff in stores as he sets out to revive the fortunes of the high street giant.

But shares plunged 10% on the day after Mr Rowe warned that the strategy - designed to turn around clothing and home sales that remain "not satisfactory" - would have a short-term impact on profits.

He set out the plans as M&S reported a 4.3% rise in underlying profits to £689.6m for the year to the start of April.

However bottom-line pre-tax profits fell 18.5% to £488.8m after one-off costs of £200m including £100m in charges relating to its ailing international business and a £50m insurance mis-selling hit related to M&S Bank.

The annual results were the first under Mr Rowe - following the departure of Marc Bolland amid struggling sales. Sales slipped 2.7% in the last quarter of its financial year.

Mr Rowe said: "We are investing to re-establish our price position by sharpening prices and to enhance service by putting more employees into our stores.

"These actions, combined with the difficult trading conditions, will have an adverse effect on profit in the short term.

"We are, however, confident that our commitment to delivering the right product, price and service will help return clothing and home sales to growth."

Mr Rowe said the group would cut prices on around 30% of its clothing ranges, having already slashed price tags on 3.5 million garments in the past few weeks.

It (Other OTC: ITGL - news) will also take out 10% of its product range to simplify the group's offering.

He said the group needed to win back "Mrs M&S" - its loyal army of women shoppers aged 50 and over, who he said have been "neglected" in recent years.

He told Sky News: "Mrs M&S is the average shopper in Marks And Spencer – obviously she’s female, just over 50, and she’s shopping with us around 18 times a year.

"She’s a working mum, maybe a grandmother, maybe just about to retire. You find Mrs M&S all over Britain. She (Munich: SOQ.MU - news) has a passion for great quality and great product, and she understands value – she’s very value savvy.”

M&S, which has carried out a "forensic review" over the last six weeks, said it was facing "difficult and challenging times" with ebbing consumer confidence, a flat clothing market and slowing online sales.

Customers were becoming "increasingly style and health conscious" while for many of the 32 million who shop at M&S, it was not their first choice, the group said.

M&S said it would "re-establish style authority" in clothes while lowering prices though cutting back on one-off promotions, and enhancing the customer experience with "sharper ranges, better availability and investment in store staffing".

Meanwhile, M&S - which employs 70,000 store staff - also said it was proposing a "significant" increase in pay for shop assistants to £8.50 per hour, and £9.65 in greater London.

However, plans for the continued phase-out of the group's final salary pension scheme - already closed to new members - will mean long-serving staff are moved to a defined contribution scheme - usually a less generous retirement option. The move affects 11,000 employees (Other OTC: UBGXF - news) .