Commercial property Marks and Spencer is expected to cut its bonus for nearly 80,000 staff after it posts its first fall in yearly profits for three years this week.
The disappointing figures and anticipated flat dividend will pile the pressure on the commercial properties Chief Executive, Marc Bolland, who could pocket a joint pay package of up to £6m this year.
Forecasters say that present trading at the high street stalwart is in “a hole”- partly due to the recent almost never-ending rain, and that commercial property M&S is currently tracking behind its targets of growing sales by as much as a quarter to up to £12.5bn by 2014.
The City will also scruitinise any remarks made by Mr Bolland, who joined M&S in May 2010, for direction on the outlook for consumer spending.
The commercial property retailer, which has more than 700 UK commercial property stores, is forecast to deliver pre-tax profits down by 3 per cent to £694m for the year to 31 March, dragged down by dreary clothing sales.
City analyst at Peel Hunt, John Stevenson, said: “Marks & Spencer hit its number for its last financial year by delivering about £100m of cost savings.”
The fall in profits could result in a considerably reduced bonus for its 78,000 UK staff. While commercial property M&S will not say anything on payment until its annual report in June, there are uncertainties that the £53m bonus pot shared by employees last year may be more than halved.
Mr Bolland, who had a income of £975,000 in the year to March 2011, is expected to be given £1m of shares for the year just ended, which are to compensate him for rewards accumulated at his former employer commercial property Morrison’s.
Under the terms of his joining Marks & Spencer, the Dutchman could also pocket shares of up to £3.9m for a performance-related arrangement, based on earning per share growth above the rate of inflation over the three years to the end of March 2012. However, partly due to the obstinately high inflation, Mr Bolland is not likely to receive this maximum payout.
Commercial property Marks and Spencer, which serves 21 million customers every week, is expected to continue its dividend at 17p a share, even though some analysts have penciled in a slight increase.
Mr Bolland could partly blame the UK’s first double-dip recession since the 1970s for the drop in profits, however City analysts believe commercial property Marks and Spencer will struggle to boost its sales from £9.7bn to £12.5bn over the three years to March 2014.
Even though the UK is seen as the main culprit for this under performance, Bolland could signal a greater contribution from online and international markets-in countries, such as China and India-than he first set out 18 months previously.
Mr Bolland is expected to admit that the wettest April on record has taken its toll on sales of summer clothing. Analyst at UBS, Andrew Hughes, said: “We assume that current trading will be in a hole.”
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