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Marks & Spencer has made a welcome return to profit as its transformation programmes starts to pay off

M&S: on the rebound

Marks & Spencer posted a pre-tax profit of £187.3m for the half year to October, reversing a loss of £87.6m this time last year.

The food, clothing and homewares retailer, ranked Elite in RXUK Top500 research, has seen consistently strong growth in food sales of 10.4% and an improving margin mix has helped to deliver a strong increase in operating profit before adjusting items compared to 2019/20. 

The Clothing & Home business delivered 17.3% growth in full price sales helping to drive a healthy improvement in operating profit before adjusting items. There are early indicators of renewed competitiveness in most categories, with increased market share overall and in both the online and store channels and improving style and value perception. 

The number of online customers continued to grow, and M&S has seen stronger retention levels of newer shoppers supported by the Sparks data and personalisation programme. In October, the retailer relaunched the acquired Jaeger business as a digital-first brand, with an encouraging early customer response.

The International business has also grown online sales, both in markets with M&S stores and on marketplaces. In addition, there as been a solid recovery in Clothing & Home sales while managing the headwinds of lockdown and restrictions in India plus the impact of EU border costs, primarily affecting Food. Despite these headwinds, International made a solid contribution to group results, says the company.

The results come after many months of turmoil for the retailer and mark the first green shoots from its wide ranging transformation programme “never the same again”.

Steve Rowe, Chief Executive comments: “Given the history of M&S we’ve been clear that we won’t overclaim our progress. Unpacking the numbers isn’t a linear exercise and we’ve called out the Covid bounce back tailwinds, as well as the headwinds from the pandemic, supply chain and Brexit, some of which will continue into next year. But, thanks to the hard work of our colleagues, it is clear that underlying performance is improving, with our main businesses making important gains in market share and customer perception. The hard yards of driving long term change are beginning to be borne out in our performance.” 

Neil Shah, Director of Research at Edison Group, adds: “Despite shortages in clothing and homeware potentially lasting until spring, the retail giant M&S reported strong interim financial results which would suggest it is meeting its ‘turn around’ target. Not only did it see profit before tax & adjusting items of £269.4m – higher than analyst expectations, but it also saw food sales rise by 10.4%, with sales excluding hospitality and franchise up 16.9%.”

Shah concludes: “The firm’s chief executive, Steve Rowe, made it clear that they are not going to overstate their progress given the history of the business, and is clear that issues from the pandemic, supply chains and Brexit will continue into next year. Clearly though, the firm’s underlying performance is improving and the efforts of the management team are beginning to show.”

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