M&S profits rise 20% — and still boss isn’t satisfied

The turnaround plan at Marks & Spencer has continued to bear fruit as pre-tax profits in the first half of the year grew by more than 20 per cent, beating analyst expectations.
The 140-year-old retailer reported a strong first half as growth in its food division helped increase profit before tax by 20.4 per cent to £391.9 million in the six months to September 28, from £325.6 million a year ago.
Under Stuart Machin, chief executive since 2022, and his predecessor Steve Rowe, M&S has been undergoing a transformation despite a challenging trading environment. Overall sales in the first half climbed to £6.52 billion, up 5.8 per cent from the same period last year. The food and clothing divisions have each reported growth in market share for four consecutive years.
Machin said: “The easy thing to do today would simply be to say that these are good results, but that wouldn’t be the right thing to do. In the spirit of being positively dissatisfied, we have so much to do over this year and beyond. Despite our strong trading momentum, there is much more opportunity for future growth and that energises us.” He added that the impact of last week’s budget on the business remained uncertain.
The food division posted an 8.1 per cent increase in sales, surpassing analyst expectations of 7.6 per cent growth. Clothing and home sales rose 4.7 per cent, beating consensus forecasts of 3.4 per cent. M&S said its refreshed clothing and home lines had increased market share by 0.9 per cent to 10.3 per cent for the 12 weeks to September 15 as it continued to outperform the market.
Like-for-like sales in the clothing and home divisions rose 5.3 per cent in the six months to September 28. Collaborations with Sienna Miller and Bella Freud, the fashion designer, were popular with customers and “drove a further increase in style perceptions”.
The group’s clothing lines performed better in the second quarter thanks to more seasonal weather. The rival retailer Next also benefited from the weather and last week upgraded its profit forecast for the tenth time in a row.
Machin said the M&S’s womenswear offering was resonating with customers, helping to boost growth in clothing sales. The group sold two million pairs of jeans in the six months to September 28, while sales in knitwear rose 26 per cent in the first half.
Machin said the retailer’s Christmas range was selling well and he was “excited for this quarter as well over the party season”. Machin said the value perception of M&S was at its best in ten years and the retailer was in its best financial health in 30 years as its growth strategy revives its fortunes.
The company’s share price has risen more than 70 per cent since the start of the year, recently hitting an eight-year high. M&S said that despite an “uncertain” consumer environment it traded well in the first half of the financial year and continued to gain market share. It added that trading in the first five weeks of the second half “remains on track”.
Machin admitted that the group’s international arm had reported a “disappointing half”. Sales in the international division fell 10.3 per cent to £321 million in the six months to September 28. He added that the group had taken action to reduce stock levels and lower its operating costs.
“There’s reasons to be confident because we do see this as a growth opportunity in the medium to longer term,” Machin said.
In a note to investors entitled “Blowing the bloody doors off”, Clive Black, an analyst at Shore Capital, wrote: “How wonderful it is to see this great British retail brand in much better health, trading well in its core market, and most encouraging of all, appreciated once again by shoppers; a national treasure if you like.
“The profit recovery over the past two years has been remarkably good. We like Machin’s ongoing dissatisfaction, which suggests room for further progress, set around the combination of assortment improvement, a better estate and an appropriate digital platform.”
M&S shares closed up 14¾p, or 3.8 per cent, at 398¼p.
The chief executive of Marks & Spencer said it was “committed to the turnaround” of its joint grocery delivery venture with Ocado.
Stuart Machin said M&S was eager for Ocado Retail to become a more successful and profitable business but added that it remained “three to five years away”.
Ocado Retail is a 50-50 partnership between the high street veteran and the robotic grocery delivery platform. The companies joined forces in 2019 to create Ocado Retail, a £750 million tie-up that gave Ocado customers access to M&S food.
The tie-up was a success at first, with M&S products proving to be more popular than those of Waitrose, Ocado’s previous retail partner. But Ocado Retail’s crown has been slipping since Covid restrictions were lifted.
Machin said challenges remained at Ocado Retail. “They are two years behind their OSP [Ocado Smart Platform] planning, their replatforming. They are behind on that,” he added.
The volume of M&S products sold on Ocado rose by 19.1 per cent in the six months to September 1. Machin said the growth in sales of the retailer’s products on the grocery delivery platform was in part thanks to the revitalisation of its food range.
“What we’re seeing is this absolutely resonate with customers on Ocado and the M&S growth outgrew the other ranges on Ocado,” he said.
The retailer also grew its presence in Ocado baskets, with M&S groceries making up 29.8 per cent of products delivered to customers in the six months to September 1, up from 28.4 per cent during the same period last year.
“There’s some really good collaboration between M&S and Ocado, the teams are working well,” Machin, 54, said.
Losses after tax at Ocado Retail narrowed to £31.9 million for the six months to September 1, down from £80.6 million during the same period last year.
In its half year results M&S said that Ocado Retail’s customer proposition had become more competitive in the first half. However, it said the company needed to improve its profitability before it expands its site capacity.