By James Davey
LONDON (Reuters) – British retailer Marks & Spencer (OTC:) is forecasting strong Christmas trading after reporting a better-than-expected 17% rise in first-half profits. more than eight years high.
After more than a decade of failed revival efforts, M&S under CEO Stuart Machin is reaping the rewards of a costly program to improve the value and quality of its food and clothing, overhaul its shopping complex, upgrade its technology and e-commerce operations and modernize its activities. supply chain.
Shares in M&S rose 6% on Wednesday, taking their year-to-date gains to 80%.
The group said it made a profit before tax and adjustments of 407.8 million pounds ($524.6 million) in the six months to September 28 – higher than analysts’ consensus forecast of 361 million pounds and the 348.1 million pounds earned in the same period last year. .
Sales rose 5.7% to £6.48 billion, with food sales up 8.1% and clothing and homeware sales up 4.7% – both higher than analyst forecasts.
“In the first five weeks of the second half, trading remains broadly on track and we are confident we will make further progress over the remainder of the year,” M&S said.
Ian Lance, fund manager at Redwheel, one of M&S’s largest investors, said the results further validated the management team’s strategy.
“However, we note that the performance of Ocado (LON:) Retail and International still has room for improvement and therefore we believe this story still has a long way to go,” he said.
Machin said M&S’s own research has shown that customers expect to spend more this Christmas than last year. He noted that more customers than last year had already reserved food for the holidays.
“I am confident that if we implement our plan, we will have a very strong Christmas,” he told reporters.
Last week, rival Next (LON:) raised its profit outlook after better-than-expected recent trading, while Primark said on Tuesday it expected good festive trading.
However, M&S warned that cost inflation in the first half was well above headline inflation and that the consumer environment was uncertain. It expects this environment to continue in the second half.
Machin said M&S faces a headwind of around £120m next year from tax rises and a rise in the national minimum wage introduced in the new Labor government’s recent budget.
He said M&S had planned the pay rise and had a good track record of limiting cost increases through efficiency savings. He said he could not rule out price increases but had no current plans to impose them.
