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* First half underlying profit fall in line with forecasts
* Clothing & home sales down 5.5%, food up 0.9%
* Improved sales performance in clothing & home in October
* CEO hopeful M&S has seen low point
* Shares up 3.2%, down 35% over last year
(Adds detail, CEO, analyst comment, shares)
By James Davey
LONDON, Nov 6 (Reuters) - Britain's Marks & Spencer
reported a 17% drop in first-half profit, dragged down by
falling clothing sales, but said it was confident it could fix
its problems and return to growth, sending its battered shares
higher.
Shares in the 135-year-old M&S, one of the best known names
in British retail, were up 3.2% at 1008 GMT, paring losses for
the year to 35%, after it forecast improved second half trading
and said its latest attempt at a turnaround was making progress.
In September the group lost its place in Britain's
prestigious FTSE 100 index, symbolising its decline.
M&S set out on its "transformation" plan shortly after
retail veteran Archie Norman became chairman in 2017 to work
alongside CEO Steve Rowe, who has been with the company for 30
years and became its boss in 2016.
Norman said in May last year the firm was targeting
sustainable, profitable growth in three to five years and has
been instrumental in speeding up the pace of change.
The retailer has been closing weaker stores, revamping
ranges, investing in technology, and struck a 1.5 billion pound
($1.93 billion) joint venture with online grocer Ocado
to give M&S a home delivery service for food.
"There's a lot to do but I'd like to think that yes we've
seen a low point and the start of something different," Rowe
told reporters when asked if M&S had reached its nadir.
He said that although the clothing division was about 18
months behind where he wanted it to be, there were signs
customers were reacting favourably to new autumn/winter
products, with improved sales in October.
"We are still in the early stages, but we are clear on the
issues we need to fix," he said.
Rowe said M&S had reduced the number of clothing lines it
sells, while improving its styling and value. Availability had
improved and clearance periods reduced.
"In some instances dramatic sales uplifts in categories
where we have restored value, style and availability illustrate
the latent potential and enduring broad appeal of our brand," he
said, pointing to women's jean sales up 30% this autumn.
DEEP-SEATED PROBLEMS
But some analysts remain unconvinced.
"We think M&S has lost like-for-like market share in
clothing & home and the problems with this business look to be
deep-seated, with most of the solutions being things M&S has
tried in the past," said RBC Europe's Richard Chamberlain.
In July Rowe sacked clothing division head Jill McDonald
after publicly criticising chronic availability and assumed
direct leadership of the division himself.
The departure of supply chain director Gordon Mowat followed
and in September M&S said finance chief Humphrey Singer was also
leaving after little more than a year in the role.
M&S made an underlying pretax profit of 176.5 million pounds
in the six months to Sept. 28 - in line with analysts' average
forecast but down from 213.0 million pounds in the same period
last year.
Clothing and home like-for-like sales fell 5.5%, hurt by the
availability and supply chain issues. Food sales increased 0.9%
on the same basis, driven by volume as prices were cut and more
family customers were targeted.
($1 = 0.7766 pounds)
(Reporting by James Davey, Editing by Paul Sandle and Emelia
Sithole-Matarise)
