- Profits up 17.2%
- Tasty growth in food
- International sales down 10.3%
Marks & Spencer (MKS) reported a forecast-beating jump in half-year profits as the retail bellwether’s turnaround continues to gain traction, sending shares in the FTSE 100 company up 8% to a five-year high of 414p.
With its dependable food and revitalised clothing and home divisions both gobbling up market share and Marks & Spencer’s cost-cutting drive on track, Shore Capital upgraded its full-year profit estimate and believes the retailer is ‘probably in its best condition’ approaching Christmas than it has been ‘for many years’.
MARKET SHARE GAINS CONTINUE
For the half ended 28 September 2024, Marks & Spencer’s adjusted pre-tax profits surged 17.2% higher to £407.8 million as group sales grew 5.8% to top £6.5 billion.
‘Executing our strategy to “Reshape M&S for Growth” has again delivered an increase in customers, sales value and volume, market share, profit and returns,’ said CEO Stuart Machin, stressing that Marks & Spencer’s food and clothing businesses have now delivered market share growth for four consecutive years.
Food sales fattened up 8.1% in the half, with like-for-like growth of 7.5%, as the retailer’s strategy of introducing lower price lines in food proved a success. In clothing and home, where Marks & Spencer appears to be better attuned to shoppers’ appetites, like-for-like sales skipped 5.3% higher with growth improving in the second quarter thanks to the arrival of more seasonable weather.
Marks & Spencer, whose new and renewed stores are trading well, suffered a 10.3% decline in sales in the international business, though the business is expected to stabilise in the next year under a strengthened management team.
CONFIDENT ABOUT XMAS
Machin added: ‘The recent Budget’s long-term impact on M&S, our suppliers, and our customers is for now uncertain. Meanwhile, we are confident and we remain on track and focused on what is in our control. We have the best Christmas food range I’ve seen in my time at M&S and the most stylish seasonal clothing offer yet, and we know customers are looking forward to celebrating Christmas with M&S.’
Shore Capital commented that ‘the profit doors have been blown off again’ as the broker upgraded its year to March 2025 pre-tax profit forecast by 9% to £830 million and suggested a good Christmas could result in further upgrades.
Russ Mould, investment director at AJ Bell, commented: ‘While initiatives like shuttering underperforming stores, opening more food outlets and making improvements to its technology and infrastructure are not rocket science they have undoubtedly delivered for the business.’
Mould added: ‘Marks & Spencer does sound a cautious tone on the impact of the Budget, which will inevitably lead to some cost inflation. The company’s financial position continues to improve with a modest reduction in net debt.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
