Marks & Spencer is looking to improve gross margins in its General Merchandise with the completion of the single tier logistics network and GM4 systems implementation.
“We see a significant gross margin improvement opportunity, with modest sales growth,” it said in its results for the year to 28th March.
“In the year ahead we will continue to deliver gross margin benefits through a combination of a more direct approach to sourcing and improved trading capabilities.
“Our M&S.com web site and e-commerce distribution centre will help us drive online sales growth and improve our profitability.”
Last year the retailer faced disruption at its distribution centre over Christmas. It said: “Sales performance was also impacted by operational challenges at our Castle Donington distribution centre over the peak Christmas period. We have learned from this, made improvements to our systems, and further strengthened the logistics management team.
“As a result of these actions, sales returned to growth in the fourth quarter and we saw gradual improvement across all key metrics: traffic grew by 15 per cent, customer satisfaction rose by 18 per cent and conversion rates improved. Some 7m shoppers have registered on the new site.
“Our investment in supply chain infrastructure gives us confidence in our long-term ability to serve our customers better. We launched an improved delivery proposition and will continue to look at ways of improving the service to our customers.”
A 2.5 per cent fall in General Merchandise was offset by a 3.4 per cent rise in Food sales. Group distribution costs were down 8.3 per cent at £408.7m. The group said this reflected new contractual terms with a key food logistics supplier, as well as the benefits of the first stage of its single tier network, and lower volumes in General Merchandise.
Group sales in the UK rose 0.7 per cent to £9.2bn, while underlying operating profit in the UK was up 2.8 per cent to £670.2m.
Chief executive Marc Bolland said: “In Food, we had an outstanding year in a difficult market. In GM, we significantly increased the gross margin, and, while sales performance was below our expectations, we returned to growth in the fourth quarter. We continued to control costs and capital expenditure tightly, resulting in significantly improved free cash flow.
“We are transforming M&S into a stronger, more agile business – putting the right infrastructure, capabilities and talent in place to drive our strategic priorities.”