Marks & Spencer has revealed bumper consumer demand even as customer finances are squeezed and outlined plans to resume dividend payments, in the first set of annual results delivered by new chief executive Stuart Machin.
Investors piled into Marks & Spencer today after the High Street stalwart demonstrated its turnaround plan is starting to pay off.
In his first full-year update since taking the top job last May, Londoner Machin said: “Our strategy to reshape M&S for growth has driven sustained trading momentum, with both businesses continuing to grow sales and market share.”
For the 12 months to April 1 sales growth came in well ahead of analyst forecasts. Clothing and home was £3.7 billion, 11.5% higher, and food was £7.2 billion, up 8.7%.
However, M&S, which has a joint venture with Ocado, did point to a number of headwinds such as the uncertain economic outlook for consumer spending and cost inflation remaining high, adding that “market conditions are expected to become more challenging”.
But the City was happy to focus on positives, with the retailer expecting modest revenue growth in the current financial year, and Machin seeing some improvements in consumer confidence.
The results also showed statutory pre-tax profit rose to £475.7 million from £391.7 million. M&S shares jumped more than 11%, or 19.45p, to 183.05p.
Machin was promoted to chief executive in May last year and since then has made a number of moves to retain and attract customers, including launching M&S’s loyalty scheme Sparks in 25 international markets, introducing new “dine-in” deals such as its £10 steak night, and investing to lock in some products for certain periods.
He said: “Despite facing significant headwinds, I am encouraged by the strong foundations established last year and excited about what we can achieve in the year ahead.”
The boss added: “Our food and clothing and home businesses invested in value to protect customers from the full force of inflation which, while impacting margin, was the right thing to do.”
Machin, supported by Katie Bickerstaffe as his co-CEO, is also continuing a shake-up of the retailer’s huge estate started by predecessor Steve Rowe.
Plans were announced in October to close 67 “lower-productivity, full-line stores” over the next five financial years, but in the same period it will invest in launching 104 more Simply Food sites. The firm has around 550 stores in total.
M&S suspended dividend payments at the start of the pandemic to protect the balance sheet, but the board now plans to restore a modest annual dividend, starting with an interim divi at the results in November.
Richard Hunter, head of markets at Interactive Investor said: “While the initial dividend is likely to signal just a moderate return, it represents something of a return to form as well as being a signal of confidence from management in immediate prospects.”
