Marks & Spencer Group Plc plans to reinstate its dividend as a long-promised turnaround finally delivers results at the UK retailer. The shares surged.
(Bloomberg) — Marks & Spencer Group Plc plans to reinstate its dividend as a long-promised turnaround finally delivers results at the UK retailer. The shares surged.
M&S expects modest growth in sales from almost £12 billion ($14.9 billion) for the year to April 1 as it moves more of its business online and revamps stores. The company plans to pay a dividend in November after scrapping payments during the pandemic.
Successive management teams had struggled to return the household brand to previous levels of profit, but the new team’s measures now are showing results. Pretax earnings for the latest year were above analysts’ expectations.
A year after Chief Executive Officer Stuart Machin took the reins, M&S is trying to broaden the appeal of its high-end grocery division and selling more third-party labels in clothing. Chairman Archie Norman appointed Machin last year along with Katie Bickerstaffe as co-CEO with a focus on apparel.
It’s M&S’s second year of revenue growth. Clive Black, an analyst at Shore Capital, said the results “positively smashed” estimates.
The shares rose as much as 8.8%, the most in a year and a half.
As part of the turnaround plan, M&S is closing 67 of its shops and opening 100 food stores under a new format. In January, the company said it would spend £480 million investing in “bigger, better stores,” including in plots vacated by the defunct Debenhams department store chain.
In clothing, M&S sees a £400 million opportunity in stocking third-party brands including Jaeger, Nobody’s Child, Ted Baker, Superdry and Seasalt. The brands are boosting its competitiveness with department store chain John Lewis Partnership Plc, which reported a third consecutive annual loss in March.
Read more: Tables Turn in the £20 Billion Fight for Britain’s Middle Class
M&S has lifted its market share in food by trying to keep prices affordable during the cost-of-living crisis. The grocer has touted its Remarksable value range of basics including bread, milk and ground beef to encourage shoppers to use M&S for their full weekly shop rather than just occasional purchases. By contrast Waitrose, owned by John Lewis Partnership, has been slower to control prices, which has dented sales.
The picture is different in online grocery, where M&S’s joint venture with Ocado Group Plc has struggled to make a profit, with shoppers buying less online after the pandemic. M&S said Wednesday that the “reset” of Ocado Retail is underway, including deeper collaboration with M&S.
The company said in a statement that despite higher energy and wage costs, it plans to save more than £150 million this year.
(Updates with shares)
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