Marks and Spencer Reports Strong Profit Growth Driven by Food Sales
UK retailer Marks and Spencer (M&S) has announced a pre-tax profit of £326 million for the first half of its fiscal year, a significant increase from £208 million in the same period last year. This boost in profit was primarily due to a substantial rise in food sales, which climbed nearly 15%.
The company’s turnaround strategy has proven successful, with its shares soaring over 90% since January. As a result, M&S has returned to the prestigious FTSE 100 index, positioning itself as the second-best performer on the index.
M&S declared an interim dividend of 1p per share on Tuesday, marking its first dividend payout since the onset of the COVID-19 pandemic. This news triggered a 9% surge in its shares to 245.5p during early trading hours in London.
CEO Stuart Machin attributed M&S’s growth to their strategic focus on providing trusted value and quality products. The company has implemented over 500 upgrades and invested £30 million in price reductions, resulting in both businesses outperforming the market.
In addition to these efforts, M&S opened three full-line stores and refurbished six others as part of a store rotation initiative. A cost reduction program that saved £100 million and modernization of its supply chain also played key roles in driving growth.
Despite these successes, M&S expressed concerns about future market conditions. Factors such as the highest interest rates in two decades and unpredictable weather patterns could potentially impact consumer behavior. These sentiments were echoed by Roula Khalaf, Editor of FT, and Clive Black at Shore Capital, who upgraded his profit forecasts focusing on profit before tax and adjusting items.
According to InvestingPro, M&S’s P/E Ratio (Adjusted) as of Q3 2023 is a low 5.37, indicating that the shares are trading at a low earnings multiple. The company’s Price / Book ratio stands at 1.34, suggesting that the market values the company close to its book value. InvestingPro Tips also highlight M&S’s high earnings quality, with free cash flow exceeding net income and consistently increasing earnings per share, reflecting the company’s strong performance and growth strategy.
However, it’s worth noting that M&S’s revenue growth has been slowing down recently, and its stock price movements are quite volatile. This suggests potential risks and uncertainties in the future.
InvestingPro offers an additional 10 tips related to M&S’s financial performance and stock trends, providing a comprehensive view of the company’s financial health and market performance. For more detailed insights, consider exploring InvestingPro’s full range of tips and real-time data.
More detail via Investing.com UK here… ( Image via Investing.com UK )