M&S shares soar as profits boom on food and online sales boost

Shares in Marks & Spencer soared by 15 per cent today after its first-half profits beat forecasts.

Profits before tax and adjusting items soared 52.8 per cent on pre-pandemic levels to £269.4million, versus analyst expectations of £205million to £264million. That sent the FTSE 100 stock rising by nearly 30p to 223.7p.

The retailer’s performance in the six months to 2 October represented a significant turnaround on losses of £17.4million at the same time last year, with M&S lifting full-year profit forecasts from £350million to £500million.

Food sales were up 10.4% as M&S continues to build market share over grocer rivals

However, M&S told investors on Wednesday it expects heightened costs to weigh on performance amid ‘supply chain pressure… pandemic supply interruptions, rising labour costs, EU border challenges and tax increases’.

Food sales increased 10.4 per cent on 2019 levels as market share grew over the period, offsetting a 1 per cent decline in clothing and home revenue, with full price sales up 17.3 per cent.

The Mail on Sunday last month revealed closely-guarded industry data, which showed M&S is luring customers away from nearly all its major supermarket rivals with market share taken from most of the other leading grocers. 

M&S chief executive Steve Rowe: ‘underlying performance is improving, with our main businesses making important gains in market share and customer perception’

The decline in clothing and home sales reflected a 17.6 per cent fall in store sales, as online sales boomed 60.8 per cent and now represent 34.4 per cent of total sales in the category.

Overall revenues grew 5 per cent on pre-pandemic levels to £5.1billion

The retailer also posted a 22.8 per cent decline in net debt on 2019, as earnings per share grew 28.1 per cent to 8.2p.

Going forward, M&S said it expects strong demand on the back of a brighter economic outlook and ‘improved customer perception’ to be ‘sustained in the near term’.

However it highlighted ‘well publicised cost pressures’, which it expects will ‘become progressively steeper’.

It added that it would focus efforts on its ‘productivity plans, store rotation and technology investment’ in order to overcome these issues.

Chief executive Steve Rowe said: ‘Given the history of M&S we’ve been clear that we won’t overclaim our progress.

‘Unpacking the numbers isn’t a linear exercise and we’ve called out the Covid bounce back tailwinds, as well as the headwinds from the pandemic, supply chain and Brexit, some of which will continue into next year.

‘But, thanks to the hard work of our colleagues, it is clear that underlying performance is improving, with our main businesses making important gains in market share and customer perception.

‘The hard yards of driving long term change are beginning to be borne out in our performance.’

M&S shares rocketed more than 16 per cent higher in early trading to 226.5p, taking year-to-date performance to 69.3 per cent.

Analyst at Freetrade Gemma Boothroyd said M&S is well placed to handle rising costs in the months ahead.

She explained: ‘Investors will be crossing their fingers M&S manages to leverage its pricing power to weather the ever-unravelling supply chain storms this year.

‘Given M&S food is already at a higher price point, its shoppers are likely less price-sensitive to incremental changes anyhow. ‘Investors probably don’t need to sound the alarm bells over what’s to come as it hikes up prices to cope with inflation. Still, M&S needs to do more than churn out more Colin the Caterpillar cakes to get shoppers back in its shops.’

This post first appeared on Dailymail.co.uk