Marks & Spencer Group Plc surged as a long-promised turnaround finally showed signs of delivering results at the UK retailer.
(Bloomberg) — Marks & Spencer Group Plc surged as a long-promised turnaround finally showed signs of delivering results at the UK retailer.
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 reinstate 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 Chief Executive Officer Stuart Machin’s measures now are starting to show results one year in. Pretax earnings for the latest year fell less than analysts expected.
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.
The retailer boosted revenue a second consecutive year. Clive Black, an analyst at house broker Shore Capital, said the results “smashed” estimates.
The shares rose as much as 14%, and are up about 50% this year.
Turnaround Plan
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 that to offset higher energy and wage costs, it plans to save more than £150 million this year.
The company isn’t giving specific profit guidance for the 2024 financial year. Analysts expect another decline. CEO Machin said the company is being conservative.
“We don’t want to over-promise and under-deliver,” he said. “Customers are still cautious, but optimism is recovering.”
(Updates with executive comments in final two paragraphs)
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