Marks & Spencer: retailer reports higher-than-expected profits with a boost coming from food sales
Mars & Spencer profits come after the retailer continues to revamp its brand
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Marks & Spencer has reported stronger-than-expected profits for the first half of the year after a surge in food sales. The retailer reported a profit before tax rise of 56.2% to £326.6m in the six months to 30 September, as food sales were up nearly 15%. Analysts had predicted it would reveal a profit of around £276 million.
M&S has been focusing on upgrading its shops, clothing lines, and digital offers as part of a big turnaround plan, and driven by higher food and clothing sales the company, which has also faced a raft of store closures, said it will hand shareholders a dividend for the first time since the Covid-19 pandemic hit, as a result of the performance.
Chief executive Stuart Machin said the business saw strong sales momentum continue into October, with customers responding well to Christmas products as Christmas food orders are up 25% against the same time last year and said demand for some seasonal products has started earlier this year. "Customer food to order is up 25% on last year and in clothing, men's and women's partywear is significantly up. Spirits are high for Christmas," he said.
However, Mr Machin warned the outlook for consumers remains “uncertain”, due to the impact of “the highest interest rates in 20 years, deflation, geopolitical events, and erratic weather”, and the retail giant remains cautious for the year ahead.
Meanwhile, revenues increased by 10.8% to £6.13 billion for the period, boosted by a 14.7% rise in food sales. The retailer said growth in the grocery arm was driven by investment into improving value amid a continued inflationary backdrop.
The clothing and home division saw a 5.7% rise in sales, with particularly strong demand for holiday clothes and denim. M&S said it also benefited from a cost reduction in its logistics networks as well as improved currency and freight rates.
Mr Machin said: “Our strategy to reshape M&S for growth has delivered strong results in the first half. We have maintained our relentless focus on trusted value, giving our customers exceptional quality products at the best possible price. There will be challenges and headwinds in the year ahead, and progress won’t be linear, but we are ambitious for future growth and are driving what is in our control.”
Peel Hunt equity analyst Jonathan Pritchard described the update as “embarrassingly good”. He said: “Marks & Spencer is making strong steps towards a full recovery. The food offer is as good as it has ever been, and the clothing and home ranges are improving but not quite there yet. The cost saving programme has underpinned the strong profit growth and International could be interesting in time.”
Shares in the company jumped 9.5% to 246.7p on Wednesday morning as a result, meaning they have more than doubled over the past year.