Marks and Spencer has reported soaring profits for the first half of the year but it expects a slower second half.
In a trading update, the retailer reported group sales growth of 10% to £6.16bn for the 26 weeks ending September 30, 2023, while profit before tax and adjusting items, its preferred measure, soared 75.3% to £360.2m.
Despite the better-than-expected profit rise, M&S was cautious about its outlook and said it expected its profit before tax and adjusting items to be “weighted towards the first half”, due to challenging comparitives and the impact of deflation, geopolitical events and erratic weather on its shoppers.
Although remaining cautious, the retailer said trading momentum has been “maintained through October” and it was “planning for a good Christmas”.
Food sales at the retailer grew 14.7%, with a £30m investment in lower prices price and ‘Remarksable value’ push driving volume growth, with sales of the range up 45%.
Clothing and home sales increased 5.7% and margin increased 12.1%, driven by a reduction in the number of sales sold at a discount.
M&S said the strong growth was driven by its store rotation project, which saw three full-line stores open and six renewed during the period, and its cost reduction programme ‘reshape for growth’, which delivered £100m savings in the first half.
The retailer said the recovery strategy for Ocado Retail had also started to make an impact but it was in the early stages of restoring direction and profitability.
M&S’ share of Ocado Retail’s net loss increased to £23.4m from £0.7m, driven by the “continued effect of costs related to new and excess capacity” in addition to a one-off accrual release last year.
It increased the range of M&S products on Ocado to over 80% and said towards the end of the period, there were increases in M&S volume and sales growth rates.
M&S chief executive Stuart 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 product at the best possible price. In food, we delivered over 500 quality upgrades and invested over £30m in price, lowering the price of 200 products and locking prices on 150 customer favourites. Our lead on quality perception widened and value perception continued to improve.
“In clothing and home, we backed lines with authority across core and seasonal product, maintaining our lead on quality and value perception and improving our style credentials. As a result, we’ve sold more product and served more customers across food and clothing and home, with both businesses outperforming the market.
“I am clear that if we serve our customers well, we serve our shareholders well, and our unrelenting focus on trusted value is matched by disciplined capital allocation. We have further strengthened our balance sheet and net debt position, with an interim dividend payment being made to shareholders for the first time in four years.”
“Looking ahead, trading momentum has been maintained through October, with customers responding positively to our Christmas ranges. 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.”
No comments yet