Marks & Spencer profit soars as turnaround strategy delivers

Sales at Marks & Spencer’s Irish business grew last year as the retailer cut costs by focusing more on local food suppliers.

Operating profit for the British shopping giant’s Ireland operation jumped to £27.9 million (€32.8 million) in the year to the end of March from £16.9 million a year earlier, the company said in a statement. Revenue increased 2.4 per cent to £320.7 million.

Much of the growth was driven by the firm lowering its supply chain costs in its food business by concentrating on acquiring supplies locally, Marks & Spencer said. That helped boost its adjusted operating margin to 8.7 per cent from 5.4 per cent last year.

The company has traditionally imported much of its food items from the UK but that became more difficult immediately after the UK exited the EU, with several items at least temporarily disappearing from Irish shelves.

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Its food unit has also boosted its franchises in Applegreen’s petrol station network around Ireland, and now has 10 such stores, it said. This is the last time Marks & Spencer will break out Irish-specific numbers in its annual report. Instead it will roll them into a new UK and Ireland reporting segment from next year,

The Irish figures came as Marks & Spencer overall reported a 58 per cent rise in annual profit, ahead of market expectations, while its strategy to reshape the business delivered strong sales growth in both its food and clothing divisions.

Shares in the 140-year old group were up 6.2 per cent in early trading on Wednesday after it also said it was confident of further progress in its new financial year.

[ M&S joins other UK grocers in raising employees’ hourly pay ]

After two decades of failed turnaround efforts, M&S, under chief executive Stuart Machin, is finally reaping the rewards of an expensive investment programme to improve the quality and value of its clothing and food, upgrade its technology and ecommerce operations, modernise its supply chain and radically overhaul its store estate.

M&S made profit before tax and adjusting items of £716.4 million (€840.4 million) in the year to March 30, ahead of analysts’ forecasts which ranged between £665 million and £705 million and the £453.3 million made in 2022/23.

Sales rose 9.4 per cent to £13.1 billion, with food sales up 13 per cent and clothing & home sales up 5.3 per cent.

“Both businesses have now delivered 12 consecutive quarters of sales growth and this trading momentum gives us wind in our sails, and confidence that our plan is working,” said Machin.

[ Marks & Spencer’s Irish business pays €100m dividend to UK parent ]

M&S is targeting a 1 per cent increase in market share in both the clothing & home and food divisions over the five years to 2027/28, with adjusted operating margins of more than 10 per cent in clothing & home and over 4 per cent in food.

It achieved the margin targets in its 2023/24 year, with 4.8 per cent in food and 10.3 per cent in clothing & home.

The most recent industry data showed M&S was Britain’s second-fastest-growing store-based grocer after discounter Lidl.

“Given our track record of delivering volume growth, market share and free cash flow, we are confident that we will make further progress in 2024/25 and beyond,” M&S said. - Additional reporting Reuters