M&S employees expecting slashed bonuses

May 18 2008

Around 75,000 employees of Marks & Spencer face slashed bonus pay-outs this week despite the retail giant achieving £1 billion in profits for the first time in a decade, it was reported today.

M&S - which suffered a disappointing Christmas amid darkening economic clouds - paid out a record £91 million last year to staff, with chief executive Sir Stuart Rose’s total bonus topping £2.6 million.

But the pot could be slashed to less than £25 million as the group misses its targets for financial performance, the Sunday Times newspaper said.

Its fortunes contrast with rival John Lewis, which has paid out a record bonus of £181.1 million to its staff - 18% ahead of the previous year.

M&S, which declined to comment, last achieved profits of £1 billion in 1998 under the leadership of Sir Richard Greenbury.

A consensus of analyst forecasts from the company puts pre-tax profits for the 12 months to March 31 at £989 million, although the firm faces a certain profits blow in the current trading year as consumers rein in their spending amid soaring household bills.

Sir Stuart is expected to warn on Tuesday that trading remains at its toughest for a decade and the difficult conditions could continue until 2010, the Observer newspaper adds.

In January, M&S said third quarter like-for-like sales dropped 2.2% - its first fall in nine quarters - and warned of further pain to come in the first serious blow to Sir Stuart’s turnaround of the previously struggling business.

M&S is the UK’s biggest clothing retailer by value and volume, but City experts also expect it to have suffered from further sales declines in the poor weather seen since Christmas, after gloomy updates from fellow high street big guns such as Next.

Investec Securities analyst David Jeary said: “After a disappointing Christmas M&S cannot, in our view, have escaped the effects of poor weather in March on its clothing business.”

The company is also reviewing its food business as it struggles with heavier competition, and could unveil changes such as more product innovation and a decision to sell non-M&S products for the first time.