Marks and Spencer has beaten analysts’ expectations, posting a 58 per cent jump in profit before tax for the full year, as chief Stuart Machin reaps the benefits of the high street darling’s turnaround plans.
Analysts had previously forecast a 35 per cent rise in underlying pre-tax profits to £653m for the year to April, with revenue growth of 8.9 per cent.
The retail behemoth said revenue was up 9.3 per cent on last year figures to £13bn, helped by demand for clothing and food lines.
Food sales grew 13 per cent as cash-strapped shoppers sought out its ‘Dine-In’ offer, Clothing sales were also up 5.3 per cent .
Off the back of the figures, Marks and Spencer said it had “the opportunity to restore dividend payments at a sustainable level.” It proposed a final dividend of 2p, giving a dividend for the full year of 3p per share.
Pushing ahead
Wednesday’s update follows a strong Christmas for Marks and Spencer, which employes some 65,000 people across the UK. The business posted a 7.2 per cent hike in total sales growth in the three months to the end of December.
Its continued success in a tricky retail environment highlights the success of chief Stuart Machin and chair Archie Norman’s turnaround plan – which included overhauling its store estate and selling more trendy clothing.
Commenting on the results, Machin said: “Two years into our plan to Reshape for Growth we can see the beginnings of a new M&S. Food and Clothing and Home grew volume and value share ahead of the market and sales increased across stores and online.
“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. We are becoming more relevant, to more people, more of the time.
“We remained unswerving in our commitment to trusted value, offering customers exceptional quality at the very best price. Food’s leading quality perception increased even further with over 1,000 products upgraded and 1,300 new lines launched. Continued progress was made on value perception with £60m invested in price. “
He added: “In Clothing & Home, style perception continued to improve and our decisive lead on quality and value perception was extended. Our commitment to ‘First Price Right Price’ supported full price sell through ahead of last year.”
Marks and Spencer’s joint venture
Marks and Spencer also provided insight into how Ocado.com, the online grocery business it has a 50 per cent stake in, was performing.
Revenue increased 11.2 per cent to £2.47bn, while adjusted earnings before interest, tax, deprecation and amortisation (EBITDA) came in at £26.8m against a loss of £15.1m last year.
While adjusted EBITDA improved, M&S group’s share of adjusted loss increased by around £8m to £37.3m due to higher interest costs on shareholder loan funding and a write-off of a deferred tax asset in the current year.
Marks and Spencer said although the financial performance of Ocado Retail remains disappointing, the “revenue improvement this year under the new management team has been marked”.
The pair is currently embroiled in a dispute over a final payment related to their online food joint venture.
Ocado and retail giant Marks signed a 50:50 deal nearly five years ago for Ocado to sell the retailer’s food via its online store, with Marks and Spencer paying an upfront sum of over £560m.
It is due to pay an additional £190.7m this August, based on certain performance targets being met.
Marks and Spencer has claimed Ocado has not reached these performance targets, so it is withholding the final payment.