British retailer Marks & Spencer (OTC:MAKSY) anticipates a surge of more than 30% in full-year profits following a significant overhaul of its food, fashion, and supply chain operations. These strategic changes have propelled M&S to surpass first-half forecasts, prompting a substantial rise in the company’s share value on Wednesday.
In a remarkable development, first-half profits leaped by an impressive 75%, aligning with the company’s commitment to reinstating dividends. Moreover, Marks & Spencer reported a positive response from shoppers to its Christmas product offerings.
This financial upswing reflects M&S’s realization of the returns from an extensive investment program aimed at enhancing the quality and value of its clothing and food products, upgrading its technological and e-commerce capabilities, and undertaking a substantial transformation of its store network.
The company now envisions annual profit to reach 640 million pounds ($785 million) according to the consensus forecast of analysts, up from the current 575 million pounds and a notable improvement over the 482 million pounds reported in 2022/23.
Commenting on the impressive results, Ian Lance, fund manager at Redwheel, one of M&S’s significant shareholders, stated, “Another very strong set of results which demonstrates that the strategy to re-shape the business is really starting to deliver.”
This sentiment was echoed by other investors. After a decade of failed turnaround efforts, M&S’s share price has more than doubled in the past year, with a notable 10% increase on Wednesday, pushing M&S’s market valuation to just under 5 billion pounds.
Stuart Machin, the CEO leading the 139-year-old group, emphasized the continuation of strong trading momentum through October and expressed optimism regarding a successful holiday season, with customers already showing positive interest in the company’s product lines.
M&S attributed part of its success to investments in its supply chain, which have allowed for more rapid access to popular clothing styles and, consequently, increased sales volumes and improved profitability.
However, it also cautioned about potential challenges in the second half of the year due to prevailing economic uncertainties, including soaring interest rates, geopolitical developments, and unpredictable weather patterns.
M&S reported a first-half profit of 360.2 million pounds for the six months ending on September 30, surpassing analysts’ average forecast of 276 million pounds. The company’s revenue also demonstrated robust growth, climbing by 10.8% to reach 6.13 billion pounds. This expansion in revenue stemmed from an increase in market share across both food and clothing and home divisions, with food sales surging by 14.7% and clothing and home sales by 5.7%.
In a move anticipated since May, Marks & Spencer reinstated its dividend with a 1 pence interim payout, marking the first such distribution since 2019/20. Analysts at Peel Hunt noted that this impressive performance may imply further positive developments, stating, “The shares have done well but were surely not discounting a beat of this magnitude.”
(1 British pound equals 1.23 US dollars)
