UK retailer Marks and Spencer (M&S) has reported a significant increase in pre-tax profit for the first half of its fiscal year. The company’s profit rose from £208 million in the same period last year to £326 million, driven primarily by a 15% increase in food sales.
M&S also announced its first interim dividend of 1p per share since the beginning of the COVID-19 pandemic. This news led to a 9% surge in the company’s shares during early trading hours in London, reaching 245.5p.
The positive financial results are a result of M&S’s successful turnaround strategy, which has seen its shares increase by over 90% since January. This impressive performance has led to the company’s return to the FTSE 100 index, making it the second-best performer in the index.
For the half-year ending September 30, 2023, M&S reported an adjusted operating profit of £223.4 million, up from £171.4 million the previous year. However, the company also saw an increase in its share of adjusted loss in Ocado Retail, reaching £23.4 million.
M&S CEO Stuart Machin attributed the company’s growth to its focus on providing trusted value and quality products. The company has made over 500 upgrades and invested £30 million in price reductions, resulting in both businesses outperforming the market.
As part of its growth strategy, M&S has opened three full-line stores and refurbished six others through its store rotation initiative. The company has also implemented a cost reduction program that saved £100 million and made efforts to modernize its supply chain.
Despite these successes, M&S expressed concerns about future market conditions, citing potential impacts on consumers from factors such as high-interest rates and unpredictable weather patterns. These concerns were echoed by industry experts, including Roula Khalaf, Editor of FT, and Clive Black at Shore Capital, who upgraded profit forecasts focusing on profit before tax and adjusting items.
InvestingPro’s real-time data and tips provide further insights into M&S’s financial health. According to InvestingPro, M&S’s P/E Ratio (Adjusted) as of Q3 2023 is 5.37, indicating that the company’s shares are trading at a low earnings multiple. The company’s Price/Book ratio stands at 1.34, suggesting that the market values M&S close to its book value.
InvestingPro Tips highlight M&S’s high earnings quality, with free cash flow exceeding net income and consistently increasing earnings per share. This reflects the company’s strong performance and growth strategy. Additionally, M&S’s valuation implies a strong free cash flow yield, further demonstrating its financial strength.
However, it’s important to note that M&S’s revenue growth has been slowing down recently, and its stock price movements are volatile. This indicates 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 a more detailed analysis, readers are encouraged to explore InvestingPro’s full range of tips and real-time data.
More detail via Investing.com here… ( Image via Investing.com )