Marks & Spencer increases profit forecast after reporting "strong start to the year"

Marks & Spencer has said its turnaround plan is working as the retailer upgraded its profit targets after strong food and clothing sales.

Based on trading in the 19 weeks to 14 August 2021, Marks & Spencer reported encouraging performance which it said provided some confirmation that its transformation programme was on track.

At the start of the year, continued restrictions across large parts of the M&S store portfolio meant that the trading outlook was initially highly uncertain.

Clothing & Home saw a good recovery in its performance. Revenue rose 92.2% compared to last year and down just -2.6% on 2019/20. The change in approach to trading, including more focussed ranges, fewer promotions and a substantially smaller summer sale, resulted in full price sales rising 9% on 2019/20.

Food revenue in the period has outperformed, increasing 10.8% on last year and 9.6% on 2019/20. Core categories and retail park locations have traded strongly. Hospitality and franchise are "progressively improving", although remain below 2019/20 levels due to reduced footfall and the slow return to more normal work patterns.

Despite the variable location performance, M&S report that overall trading has been "ahead of the market".

The pivot to online has continued with store sales down -19.8% on 2019/20 as many locations remain in slow recovery from the pandemic, although retail parks have outperformed. Clothing & Home online sales for the period were up 61.8% on 2019/20 and made up 35% of total Clothing & Home sales.

A spokesperson for Marks & Spencer said: "Although there has likely been an element of pent-up consumer demand in trading to date, we believe this performance provides strong confirmation of the beneficial effects of the last 18 months “Never the Same Again” changes. Despite this, there remains substantial uncertainty as to the continued strength of consumer demand, as well as disruption in both supply chains and consequent pressures on costs and margin.

"However, assuming no further COVID-related restrictions on trading, at this early stage we expect adjusted profit before tax for the year to be above the upper end of previous guidance of £300-350m. We will report half year results on 10 November 2021 at which point we will provide more detailed financial guidance for the balance of the year."

Shares soared by 11.4% to 158.95p in early trading on Friday.