M&S’s profit rose by 58 per cent after introducing a new plan, ET BrandEquity

(Representative image)

Marks and Spencer (M&S) on Wednesday beat forecasts, increasing annual profit by 58% and announcing its first annual dividend since 2019, suggesting the British retailer may have finally found the recipe for recovery after two decades of trying.

Shares in the 140-year-old food and clothing group, one of the biggest names in British business, rose as much as 10 percent to a six-year high of 300 pence after it said it was in its best financial shape since 1997, and he predicted there would be more.

After years of failed turnaround efforts, M&S, led by CEO Stuart Machin, is reaping the rewards of costly investments to improve the quality and value of its clothing and food, upgrade its e-commerce technology and operations, modernize its supply chain and renovate its store assets.

“What’s most exciting is that the recovery strategy appears to have some way to go and yet this is not yet reflected in the share price as many investors remain skeptical of Marx’s recovery story,” Ian Lance, fund manager at Redwheel, said one of M&S’s largest investors.

In the year ended March 30, M&S made a pre-tax and adjusted profit of £716.4m ($913m), beating analyst forecasts of £665m-705m and £453.3m for 2022/23 .

Sales rose 9.4 per cent to £13.1 billion, with food sales up 13.0 per cent and clothing and homeware sales up 5.3 per cent.

“Both companies have now recorded 12 consecutive quarters of sales growth, and the trading momentum gives us confidence that our plan is working,” Machin said.

M&S aims to increase market share by 1 percentage point in both its clothing and homewares and fine food divisions over the five years to 2027/28, with adjusted operating margins of over 10 percent in the clothing and homewares segment and over 4 percent in the clothing and household products segment. food.

But it achieved margin targets already in 2023/24, reaching 4.8% for food and 10.3% for clothing and homeware. Its market share increased by 40 basis points in apparel to 10 percent and by 15 basis points in food to 3.55 percent.

The latest industry data showed that M&S ​​is the second fastest growing grocery chain in the UK, after discounter Lidl.

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