M&S FY sales and profits jump as turnaround strategy bites
Profit-before-tax rose by 21.4% to £474.7m, up against £391.7m the prior year, while group sales were up by 9.9% to £11.98m
M&S has seen its full-year profits and sales increase despite the ongoing cost-of-living crisis and tough economic conditions over the period, with the group attributing its performance to its latest turnaround strategy.
Profit-before-tax rose by 21.4% to £474.7m, up against £391.7m the prior year, while group sales were up by 9.9% to £11.98m.
Over the year, Clothing and Home sales rose by 11.5%, with LFL sales up by 11.2%, driven by a “more confident approach to buying and a focus on the modern mainstream customer”. Store sales in the category outperformed and online sales were also up, with volume and value market shares both increasing.
Meanwhile, food sales grew by 8.7% with LFL sales up by 5.4%, outperforming the market in volume and value. While investment in value reduced margin, M&S said the positive customer response supported the delivery of improved trading performance in the second half.
International sales were also up 11.2%, driven by a demand for clothing from global partners. As a result, profits recovered despite the combined impacts of the exit from Russia and on-going EU border related costs.
Despite solid performances across the board, Ocado Retail sales were down 1.2% amid a lower shopping frequency post-pandemic. Profitability was also impacted by the effects of higher fixed costs from under-utilised capacity.
Nonetheless, M&S said its promising overall performance comes as its new growth strategy boosted trading momentum in the period, adding that it now plans to restore a “modest” annual dividend to its shareholders. The group previously suspended them at the start of the pandemic to help shore up money.
It warned that “while the economic outlook for consumer spending is uncertain, cost inflation remains high, and market conditions are expected to become more challenging, the strategy is beginning to deliver improved performance and there remains much within the group’s control”.
Looking ahead, modest growth is expected in FY24 revenues, driven by omni-channel as well as an accelerating store rotation plan.
CEO Stuart Machin said: “One year in, our strategy to reshape M&S for growth has driven sustained trading momentum, with both businesses continuing to grow sales and market share. Our Food and Clothing and Home businesses invested in value to protect customers from the full force of inflation which, whilst impacting margin, was the right thing to do, as serving our customers well is the only route to delivering for our shareholders.
“Food outperformed the market, with customer perception for quality and value the highest in six years. The benefits of the Gist acquisition and operational efficiencies also supported an improved performance in the second half. Clothing and Home retained market-leading value perception, and its style credentials continue to improve.”
He added: “Sales were up in store and online, supported by growth in Click and Collect sales, active App users and Sparks loyalty membership; demonstrating the emerging power of our omni-channel model. The store rotation and renewal programme delivered strong sales uplifts and will accelerate this year, including the opening of five brand defining full-line stores in major cities.
“Our disciplined approach to capital allocation means we can invest for growth, while further reducing net debt and maintaining investment grade credit metrics, and we plan to resume dividend payments at our interim results.”
