Marks & Spencer: Profits up, food sales surge, dividend restored but more stores will close

Marks & Spencer’s turnaround has been branded “the real deal” after the retail stalwart revealed stronger-than-expected profits and restored its dividend while it continues with a sweeping restructuring that has involved scores of store closures and revamps.

The high street bellwether said it will hand shareholders a dividend for the first time since the pandemic hit, as a result of the solid performance, buoyed by a jump in food sales. Chief executive Stuart Machin said the business saw strong sales momentum continue into October, with customers responding well to Christmas products.

However, M&S cautioned that the outlook for consumers remains “uncertain”, flagging the impact of “the highest interest rates in 20 years, deflation, geopolitical events, and erratic weather”. It came after the group posted a pre-tax profit of £325.6 million for the six months to September 30, up 56.2 per cent on the same period last year. Analysts had been forecasting a figure of about £276m.

Revenues increased by 10.8 per cent to £6.13 billion for the period, boosted by a 14.7 per cent hike in food sales. M&S said growth in the grocery arm was driven by investment into improving value amid a continued inflationary backdrop. The group is to “accelerate its store rotation” plans with the aim of having about 180 full-line stores and 400 M&S-operated food stores in “growth locations” by 2028.

M&S has undergone a significant turnaround plan in recent years including a raft of store closures while others have been opened in the likes of out-of-town locations. Picture: Lisa Ferguson

Meanwhile, its clothing and home division witnessed a 5.7 per cent rise in sales, with particularly strong demand for holiday clothes and denim. M&S said it also benefited from a cost reduction in its logistics networks as well as improved currency and freight rates.

Machin said: “Our strategy to reshape M&S for growth has delivered strong results in the first half. We have maintained our relentless focus on trusted value, giving our customers exceptional quality products at the best possible price. There will be challenges and headwinds in the year ahead, and progress won’t be linear, but we are ambitious for future growth and are driving what is in our control.”

Mark Crouch, analyst at investment platform eToro, said: “After multiple false dawns over the years, Marks’ turnaround looks like the real deal this time. This is a very strong update from the retailer, carrying on the momentum from its August trading update. While finances are still tight for many households, M&S’s focus on value and price reductions has shored up sales, which makes us confident that it can maintain its strong performance going into the all-important Christmas trading season.”

Richard Hunter, head of markets at Interactive Investor, described M&S’s food offering as the “bedrock” of the business, providing a springboard for the revitalised clothing and homewares division. He said: “Clothing and home is fast becoming the poster child for the new-look M&S. The lines and the look of the offering are clearly appealing to the new target market of the ‘modern mainstream customer’ as the company attempts to throw off the shackles of a previously dowdy and tired image. The store rotation programme is being accelerated and selected stores revamped to project a more fashionable and less cluttered experience than has been the case in the past.”

Zoe Gillespie at RBC Brewin Dolphin added: “M&S’s results have provided some pre-festive period sparkle, albeit with the caveat of an uncertain consumer backdrop next year.”