M&S shares soar 10% on Christmas trading forecasts
Christmas' On 'quietly Confident Is Executive Stuart Machin Chief M&s
Shares in Marks & Spencer closed 10% higher after the British retailer smashed first-half profit forecasts and said it expects full-year profit to leap as its latest turnaround effort after years of false dawns gathered momentum.
The retailer said an overhaul of its food, fashion and supply chain had helped it deliver a 75% jump in first-half profit and re-instate its dividend after four years. Its shares have more than doubled over the last year to value the retailer at £4.9bn (€5.6bn). In comparison, clothing retailer Next is worth £9.5bn.
"I'm quietly confident on Christmas...I think we're in very good shape," M&S chief executive Stuart Machin told reporters, adding to optimistic comments on the festive season made by UK rivals Tesco, Sainsbury's, Next, and Penneys-owner AB Foods, which contrasted with downbeat recent British economic data.
Mr Machin said M&S had traded well through October and shoppers were already buying up its Christmas ranges. He said its Christmas food-to-order service had seen orders up 25% on last year, sales of party food were up by "double digits" and sales of women's partywear were up 50%, with one black sequin dress already selling 5,000 units in one week.
M&S's bias towards older, more affluent, customers is giving it some protection from the rising cost of living.
The results showed that after more than a decade of failed turnaround efforts, M&S was finally reaping the rewards of an expensive investment programme to improve the quality and value of its clothing and food, upgrade its technology and e-commerce operations, and radically overhaul its stores.
M&S said investments in its supply chain, which have enabled it to source popular clothing styles more quickly, had led to an increase in volumes sold, plus an improvement in its profitability.
It now expects analysts' consensus forecast for annual profit to rise to £640m (€734m), which compares with the £482m earned in 2022/23. "Another very strong set of results which demonstrates that the strategy to re-shape the business is really starting to deliver," Ian Lance, fund manager at Redwheel, one of M&S's biggest shareholders, said.
M&S did warn, however, that with so much uncertainty on the economic horizon, from the highest interest rates in 20 years to geopolitical events and erratic weather, it could see pressures grow in 2024, with Mr Machin noting 78% of its customers remain concerned about the cost of living.
M&S reported a profit of £360.2m for the six months to the end of September as revenues rose 10.8% to £6.13bn. Food sales were up 14.7%, while clothing and home sales increased 5.7%.
"The shares have done well but we're surely not discounting a beat of this magnitude," said analysts at Peel Hunt. The results were a “broad-based beat” across M&S’s divisions, wrote Izabel Dobreva, an analyst at Morgan Stanley.
Clothing and home sales grew 5.7% in the first half with particular growth in holiday garments and denim. Store sales outperformed online and profitability was boosted by lower freight rates and cost reductions in logistics.
M&S has been working to reverse the image of dowdy, ill-fitting clothing. A recent clothing campaign fronted by actress Sienna Miller attracted new customers and sales were ahead of expectations.