British retailer Marks & Spencer has reported a better-than-expected 8.1% rise in sales over the Christmas trading period, driven by market-leading growth in food and a strong performance in womenswear.
The company said the strong performance underpinned its confidence about profit growth this year, but it sounded a note of caution on pressure from higher-than-anticipated wage and business rates inflation.
"We enter 2024 with a spring in our step, but clear eyed on the near-term challenges," chief executive Stuart Machin said.
Shares in M&S, which have doubled over the past year, fell 4.5% in early deals.
M&S said like-for-like food sales rose 9.9% in the 13 weeks to 30 December, ahead of the most optimistic analyst forecasts and a consensus of 6.6%, while clothing and home growth of 4.8% also soundly beat expectations of a 2.8% rise.
In food, M&S said it outperformed the rest of the grocery market, noting that its volume sales were up 7%, while clothing and home also grew ahead of the market.
A Strong Christmas
Industry data published this week had pointed to a strong Christmas food performance, with M&S's total sales growth only topped by discounter Lidl GB.
Investors have growing conviction that Machin's strategy to turn around the 140-year old group after years of false dawns is gathering momentum, with both its clothing and food businesses firing.
The group is finally reaping the rewards of investments to improve the value and quality of its clothing and food, upgrade technology and e-commerce, and overhaul its store estate.
But the turnaround comes at a time when expectations for economic growth in Britain remain uncertain, and M&S noted both consumer and geopolitical risks in the year ahead.
However, M&S said it was confident its results for the year to end-March would be consistent with market expectations.
Analysts currently expect adjusted pretax profit for the year to come in at £663 million (€770.6 million), up from £482 million (€560.2 million) in 2022/23.
Analyst Comments
Russ Mould, investment director at AJ Bell said, “Marks & Spencer has enjoyed a good Christmas with another strong showing in food, and its clothing and home arm trucked along nicely during its third quarter. Dig deeper and you’ll see that both divisions saw a slowdown in the pace of growth versus its first-half period.”
“Consumers are still being cautious about their spending so much of the headwinds are out of Marks & Spencer’s control. But that hasn’t stopped the company from doing its best to keep the tills ringing,” he added.
Clive Black, head of consumer research at Shore Capital added, “A modernising M&S is reverting to the positive traits those of a certain age warmly remember. Grounded management speaks to confidence that FY24 will be consistent with market expectations.”
News by Reuters, additional reporting by ESM.
