Sparkle returns to M&S: Boss hails the ‘hard yards’ of recovery plan as shares soar 16.5% but warns on supply chain woes, Brexit and the pandemic
Marks and Spencer hailed the beginning of the end of its long-term troubles as it raised profits forecasts for the year.
In a bullish update that sent shares soaring 16.5 per cent, chief executive Steve Rowe said the ‘hard yards’ of his recovery plan were showing results.
The high street retailer now expects profits in the region of £500million – 40 per cent higher than the £350million previously pencilled in.
Sales up: M&S now expects profits in the region of £500m – 40% higher than the £350m previously pencilled in
Rowe sounded a cautious note by warning of ‘headwinds’ from the pandemic, ongoing supply chain disruptions and Brexit.
But shares rose 16.5 per cent, or 32.05p, to 226.5p – the highest level since late 2019 – as investors cheered.
AJ Bell investment director Russ Mould said ‘something spectacular’ must have happened since August.
The stock has gained 66 per cent this year and 166 per cent since its lows last year, giving M&S a value of £4.4billion.
Rowe said: ‘Given the history of M&S we’ve been clear that we won’t overclaim our progress.
‘But 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.’
M&S has more than 1,000 shops in the UK including more than 700 Simply Food shops.
Rowe took over in 2016 but his attempts to turnaround the business after years of falling clothing sales were disrupted by the pandemic.
The 137-year-old retailer fell out of the FTSE 100 – of which it was a founding member – in September 2019. Shares then hit a record low of 85p last year.
But M&S yesterday recorded a profit of £269.4million in the six months to October 2.
That compared with a loss of £17.4million in the same period last year and profits of £176.3million two years ago.
The projection of £500million of profits for the full year marked the second upgrade in three months.
In August, it said that it would beat its forecast of between £300million and £350million.
Bouncing back: In a bullish update M&S chief executive Steve Rowe (pictured) said the ‘hard yards’ of his recovery plan were now starting to show results
Clothing and home sales were still 1 per cent lower than the first half two years ago but profits in this division hit £156.2million – up from £109.6million pre-Covid.
Food sales jumped 10.4 per cent from 2019 and it reported a £143.7million profit in the period, up from £92.2million in 2019.
Several rivals including Debenhams and Arcadia have disappeared from the High Street, which Rowe said had boosted business.
But he added: ‘I am sure there is a benefit, but am also sure our teams have been responsible for driving the majority of those benefits.’
The firm did not announce a dividend, despite the positive results, and does not expect a payout to shareholders this year. It said it will focus on ensuring its profitability is sustainable.
Retail analyst at Shore Capital Clive Black said: ‘M&S has started selling products people like, that is the easiest way to put it.
We have had a lot of encouragement from shoppers in recent months who say their products are better quality, style and prices. And they are available in shops and online.
‘When you come from the mess M&S was in five or six years ago, it has taken a lot to get here.
‘It has been in decline for a decade but we have seen a real turning point.’
He added: ‘There is more to do and they are not calling victory yet but it is encouraging.’