Retailer grows

Machin hails ‘beginnings of new M&S’ as profits surge

M&S clothing advert
M&S has invested heavily in promoting its fashion ranges

Marks & Spencer chief executive Stuart Machin hailed the “beginnings of a new M&S” after revealing that profit over the last year surged by more than 40%.

The company made big gains in food and saw its clothing and home business turn in a healthy rise in sales.

Pre-tax profit rose 41.4% to £672.5 million in the 12 months to 30 March from £475.7m in the previous year.

Food showed market-leading volume growth with sales rose 13%, while Clothing & Home sales were up 5.3%.

The board is proposing a total dividend for the full year of 3p per share.

Mr Machin said: “Two years into our plan to Reshape for Growth we can see the beginnings of a new M&S. Food and Clothing & Home grew volume and value share ahead of the market and sales increased across stores and online.

“Both businesses have now delivered 12 consecutive quarters of sales growth and this trading momentum gives us wind in our sails, and confidence that our plan is working. We are becoming more relevant, to more people, more of the time.

“We have a clear plan, a clear vision for the future, and there is so much opportunity ahead of us. We are at the beginnings of a new M&S.”

Zoe Gillespie, investment manager at RBC Brewin Dolphin, said: “The turnaround of M&S has been remarkable. The retailer is delivering strong growth, with profits well ahead of last year, a much stronger balance sheet, and good cashflow.

“With such a solid set of foundations, M&S has restored its dividend – which is good news for shareholders and indicative of the management team’s confidence. Food is very much the staple of the business, but it is particularly encouraging to see growth coming through digital channels, the acquisition of Gist, and the previously troubled clothing and home division.

“M&S is continuing to invest, with a clear strategy and achievable targets for the year ahead. The only flies in the ointment are the international division and the Ocado Retail partnership – but given time and resources, hopefully they can follow the rest of the group’s incredible progress.”

Marks & Spencer Gyle Edinburgh
M&S delivered 12 consecutive quarters of sales growth (pic of M&S Gyle: Terry Murden)

Russ Mould, investment director at AJ Bell, said: “The turnaround story has been years in the making and it finally looks like the retailer has cracked it.

“Despite this positive situation, there is still a lot more to do. The Ocado joint venture needs to pull its socks up and the international operations aren’t as strong as they once were.

“By its own admission, Marks & Spencer needs to move faster with efforts to offer a more personalised service. Fortunately, having the core business do well means it can afford to take a bit longer to fix the other bits.”

Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, said: “M&S has had an excellent year and there is now enough evidence to suggest this isn’t a flash in the pan.

“Sales have grown strongly, with 12 consecutive quarters of growth for Food and Clothing and Home. Profit margins have also risen nicely as a result of greater efficiency, and cash flow has been strong, enabling M&S to return to the dividend register.

“The most impressive thing about the M&S turnaround story so far has been the market share gains, in both Clothing and Food. They have been able to achieve this while reducing discounts, which is a good sign. In other words, they aren’t just slashing prices in the hope of getting quick sales growth. They have been focused on reinvigorating branding and designs, which ought to be more sustainable.

“All-in-all, M&S’ execution has been impressive in a difficult retail environment. Encouragingly, it sounds like there are plenty more self-help initiatives to go for, to keep this momentum going. 

“The only fly in the ointment is that investor expectations have now been reset to a higher level. This means the pressure on M&S to keep delivering has increased, and any slip ups are likely to be harshly punished.”

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