Marks & Spencer has reported group revenue for its 2020/21 financial year of £8.9 billion (€10.3 billion), with food sales up 1% and clothing and homewares down 31%.
"In a year like no other we have delivered a resilient trading performance, thanks in no small part to the extraordinary efforts of our colleagues," Steve Rowe, M&S chief executive said.
Here's how leading industry analysts viewed its performance:
Russ Mould, AJ Bell
“Marks & Spencer’s full year results are easy to interpret. The retailer smashed it with food sales, but clothing was a flop as the working from home trend caused a slump in suit sales and the nation no doubt decided it didn’t need to buy any of its pastel-coloured jumpers.
“The company seems to be hoping that 2021 will be a turning point (just like each of the previous years and their turning points, given its eternal turnaround programme).
“The retailer is betting its fortunes on a permanent shift in the type of clothes people want. So smart suits and tailoring services are going to be downsized in favour of giving more floor space to athleisure items, children’s clothes and more smart casual items for those who do return to the office.
“If this new push with clothes is unsuccessful, it will no doubt raise the question once again as to whether Marks & Spencer would be better off focusing purely on food. It wouldn’t be easy to sell the clothing and homewares arm because of the shared floor space with food in so many stores, plus there can’t be many businesses who would want to take on additional property. Therefore, it has to make the new clothing strategy work.”
Chloe Collins, GlobalData
“Though M&S now insists it will never be the same again, its FY2020/21 results prove that it should have changed its ways sooner.
"That being said, with its MS2 strategy now firmly in place to ensure the company has an ‘online first’ approach, plans announced to ‘rotate’ its estate and modernise its remaining full line stores, and positive trading in the first six weeks of FY2021/22, with sales impressively above the comparative period two years ago, investors have seemingly regained some confidence in the business, with its share price rising c.5% in early morning trade.
"While the Ocado business is planning capacity growth of 50%, M&S’ own food operations failed to achieve growth this year, unlike the big supermarkets, due to its presence in city centres and travel locations, which suffered significant revenue declines. However, its switch to focus on value within food has been wise, as shoppers have become more economically cautious due to the impacts of the pandemic, and will continue to be at least in the short term."
Clive Black, Shore Capital
"M&S has survived FY2021 with positive adjusted profits and lower non-lease ND, so better than we estimated, but also no dividend declaration, more asset write downs and exceptional items. More substantively, it has accelerated the pace of necessary change with a management team in place to expedite improved trading strategies in each of its divisions.
"The new news with the update is the evolving real estate strategy, which remains self-financing but embraces a notable iteration around expanding the food footprint, the introduction of prime and core stores and further closures. With a complementary working and improving online capability (14% C&H margin), in food and non-food too, M&S is emerging as fit for purpose, reflected in the most optimistic overall commentary from management for some time.
"Accordingly, noting encouraging current trading but also fragile markets and continuing uncertainty, we reintroduce medium-term financial forecasts that envisage sequential profit growth, further deleveraging, the medium-term approach of investment grade status and the recommencement of dividend declarations."
James Anstead, Barclays
"The M&S FY results statement was admirably detailed and struck a much more confident tone. The morning headlines understandably focused on the PBT guidance for the year ahead, with a central scenario of £300-350m being at least in line with what we had forecast (£305m) and Bloomberg consensus (c£300m).
"But the more important guidance point is that M&S is targeting a Clothing & Home (C&H) margin >7.0% for 23/24 (i.e. ahead of 19/20 levels). This is perhaps the biggest 'moving part' of the P&L, but one that has been difficult to forecast with confidence given recent performance. If C&H can indeed deliver margins of over 7% by 23/24, then it would imply an EPS of >18p (and in turn a P/E of below 10x)."
"Our higher profit forecasts push up our valuation from 165p to 200p. With the share price having doubled from its 52-week lows, the extent of potential upside is necessarily more limited than was once the case. We feel that M&S should enjoy encouraging sales and profit momentum over the year ahead and that – together with valuation upside – encourages us to reiterate our Overweight stock rating. However, while margin targets are important, execution is what will ultimately matter and we will watch closely."
© 2021 European Supermarket Magazine. Article by Stephen Wynne-Jones. For more Private Label news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.
