Marks & Spencer raises 2023 outlook in surprise trading update

Marks and Spencer on Tuesday raised its guidance for the current fiscal year amid market share improvements in both its clothing and home segment as well as its food business.

The UK retailer, which reports first-half interim results on November 8th, said it anticipates profit growth this year after a strong 19-week period between the start of April to the end of the first week of August.

M&S said that the improvement was broad-based with like-for-like food sales up 11 per cent across the group and clothing and home sales up 6 per cent over the period.

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In a surprise statement that sent the high street chain’s shares up as much as 9 per cent in London, M&S said group operating margin has “continued to be robust”, driven by strong store performance and its ongoing store renewal effort.

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“There remain considerable uncertainties about the economic outlook,” it said, “and there is a risk that the consumer market will tighten as the year progresses. Nevertheless, we now expect the outcome for the year to show profit growth on 2022-23 and the interim results to show a significant improvement against previous expectations.”

In May, M&S reported a 7.8 per cent fall in profit in the year to the start of April as strong sales growth was offset by inflationary pressures and the impact of Brexit-related costs on its Irish food business. Sales in its Irish supermarkets declined 3.5 per cent but “robust” clothing and homeware sales enabled overall sales here to increase 15.1 per cent in the year.

Slowing the decline

At the time, the group said new import rules and additional paperwork associated with Brexit initially forced the UK retailer to cut 800 product lines in its stores in the Republic, including such items as free-range chicken, orchids or goods containing Parmesan cheese. M&S said it had taken steps to slow the decline, including cost restructuring, increasing the proportion of locally sourced supply and assessing “new routes to market” in the form of a franchise store trial with forecourt retailer Applegreen.

While M&S did not give a specific revised profit guidance for the current financial year, the statement came after clothing retailer Next issued a similar upgrade earlier this month.

Charlie Huggins, manager of the quality shares portfolio at UK investment service Wealth Club, said the two statements give weight to the fact that UK consumers continue to spend despite stubbornly high inflation.

“M&S cautions that there are still ‘considerable uncertainties about the economic outlook’. Nevertheless, there are more reasons for optimism now than there have been for some time,” he said.