M&S shares soar as it eyes profit growth and consumers prove resilient

Marks & Spencer shares soared on Tuesday after the retailer said a better-than-expected first half should lead to profit growth this year. 

In a trading update, M&S told investors that like-for-like food sales growth of 11 per cent, and clothing and home sales growth of 6 per cent, in the first 19 weeks of 2023 is forecast to drive a ‘significant improvement against previous expectations’.

It is an upgrade on previous guidance for a full-year profit dip and marks progress on M&S plans to ‘reshape’ the business under its ongoing turnaround strategy.

Marks & Spencer shares were up 8.6 per cent to 222.2p in early trading on Tuesday.

M&S says it expects profit growth for this year 

M&S said: ‘Overall, group operating margin has continued to be robust, driven by strong store performance and enhanced by our store rotation and renewal programme.

‘There remain considerable uncertainties about the economic outlook, and there is a risk that the consumer market will tighten as the year progresses.

‘Nevertheless, we now expect the outcome for the year to show profit growth on 2022-23, and the interim results to show a significant improvement against previous expectations.’

The short update also said M&S had continued to invest in ‘quality and trusted value’, with the firm ‘sharpening prices’ on some of its products.

Inflation weighed on M&S profits last year, particularly food and labour cost pressures, but recent price cutting efforts suggest the retailer is starting to see these issues ease.

Susannah Streeter, of Hargreaves Lansdown: said: ‘[Marks and Spencer]… is seen as a bellwether for consumer sentiment and by raising its profit outlook it shows just how much more resilient shoppers are proving to be despite the ongoing storm of inflation and higher interest rates.’

M&S chairman Archie Norman last month flagged concerns that the firm’s turnaround plan, which  has seen it shut dozens of larger sites in an overhaul of its store portfolio, was taking ‘too long’.

Norman also said the state of the High Street retailer was ‘fragile’ and that it ‘could slip back’ if executives took their eye off the ball.

And last month, M&S found itself at in a row over shareholder democracy and some investors vented frustration at its new digital-only AGM policy.

But M&S shareholders are also riding a wave of rising value, with shares jumping to a 15-month high in May as it released bumper results.

Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, said: ‘[Today’s] results are also testament to the group’s progress against its strategy, launched last year.

‘This aims to improve brand perception and designs, reduce discounting, and improve the online offering, while taking a knife to costs and instilling a more entrepreneurial culture.

‘Today’s trading update suggests this plan is resonating with consumers with M&S continuing to increase its market share in clothing and home.’

This post first appeared on Dailymail.co.uk