- Profit Outlook Brightens: Marks & Spencer Shares Surge on Better-than-Expected First Half
- Sales Growth Driving Improvement: Like-for-Like Food and Clothing Sales Boost M&S’s Turnaround Efforts
- Resilience Amid Challenges: M&S Demonstrates Consumer Resilience Despite Inflation and Rising Rates
Marks & Spencer shares surged on Tuesday following the retailer’s announcement that a better-than-anticipated first half will likely result in profit growth this year.
In a trading update, M&S informed investors that like-for-like food sales growth of 11% and clothing and home sales growth of 6% in the first 19 weeks of 2023 are anticipated to drive a “significant improvement compared to previous expectations.”
It is an upgrade from previous guidance for a full-year profit decline and signifies progress in M&S’s efforts to reshape the company as part of its ongoing turnaround strategy.
Marks & Spencer shares rose 8.6% to 222.2p in Tuesday morning trading.
M&S stated, “Overall, group operating margin has remained robust, driven by strong store performance and augmented by our store rotation and renewal program.”
The economic outlook remains uncertain, and there is a possibility that the consumer market will tighten as the year progresses.
Nevertheless, we now anticipate that the annual results will show a profit increase compared to 2022-23 and that the interim results will demonstrate a significant improvement compared to previous projections.
The brief update also stated that M&S had continued to invest in ‘quality and trusted value’ while sharpening prices on a number of its products.
Inflation weighed on M&S’s profits last year, particularly food and labor cost pressures, but the retailer’s recent price cuts suggest these concerns are beginning to abate.
Susannah Streeter, of Hargreaves Lansdown, stated, “[Marks and Spencer] is viewed as a barometer of consumer sentiment, and by raising its profit outlook, it demonstrates just how much more resilient shoppers are proving to be despite the ongoing storm of inflation and rising interest rates.”
M&S chairman Archie Norman expressed concern last month that the company’s turnaround strategy, which has seen it close dozens of larger stores as part of a store portfolio overhaul, was taking ‘too long’.
Additionally, Norman stated that the state of the High Street retailer was ‘fragile’ and that it ‘could slide back’ if executives lost focus.
Last month, M&S was in a shareholder democracy battle over its new digital-only AGM policy.
But M&S shareholders are also riding a wave of rising value, as the company’s shares reached a 15-month high in May following the publication of stellar financial results.
Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, stated, ‘[Today’s] results are also evidence of the group’s year-over-year progress in implementing its strategy.
This initiative intends to improve brand perception and designs, reduce discounting, and enhance the online offering while slashing costs and fostering an entrepreneurial mindset.
This plan is resonating with consumers, as M&S continues to increase its market share in apparel and home, as indicated by today’s trading update.
