British retailer Marks & Spencer has nudged up its profit outlook after it reported a strong Christmas performance, particularly in food, where it outperformed the market.
M&S, which is recovering from a decade of decline, said it now expected full-year profit before tax and adjusted items to be at least £500 million (€598.5 million).
Double Digit Growth In Food
It said food sales increased 12.4% against its pre-pandemic performance two years ago in the 13 weeks to January 1, beating market forecasts of 10% growth.
Clothing and home sales rose 3.2% on the same basis, also surprising on the upside. The market had expected a 0.9% fall.
Chief executive Steve Rowe said, "Trading over the Christmas period has been strong, demonstrating the continued improvements we've made to product and value."
He said food had outperformed the market over both 12 and 24 months, while clothing & home had delivered growth for the second successive quarter, supported by more full-price sales.
The update provides evidence that one of Britain's most elusive turnarounds could finally materialise. M&S's shares have nearly doubled over the past year, while in November, the group reported a strong first-half performance.
Last September, the group announced that it was reviewing the future of its French business.
Analyst Viewpoint
Commenting on M&S' performance, Ross Hindle, analyst at Third Bridge, said, "Back in 2020 M&S was struggling to find its mojo, however, a well-executed restructuring has seen the Group outperform peers over the past 12 months. Fresher fashion labels, an improved website, and a more modern store environment are all building momentum, however it is the Group’s partnership with Ocado that continues to shine bright.
"The M&S and Ocado partnership has been a fruitful one for both parties with M&S products now accounting for nearly 30% of the Ocado basket. We expect this partnership to continue to blossom and our experts cannot foresee the rumours of a total buy-out by M&S materialising."
Elsewhere, AJ Bell's Danni Hewson commented, “This was a business making the right moves at the right time. But what happens when life starts to really get back to normal. Will that normal continue to work in Marks and Spencer’s favour or will the business need to pivot to keep its reclaimed relevance? It’s worked hard to throw off the cloak of obscurity when it comes to its fashion offer. It’s finally figured out its place in the clothing jigsaw and is delivering high quality, reasonably priced staples in a convenient way.
“But there are headwinds already buffeting the business. Inflation will squeeze the amount of cash shoppers have to spend and with the discounters already drawing up battle plans to scoop up budget conscious shoppers, Marks and Spencer is going to have to think carefully about the one part of the business that’s been holding everything else up."
News by Reuters, edited by ESM. For more Retail news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.
