Marks & Spencer half-year results – What analysts have to say
Marks & Spencer reported ‘robust’ first-half trading this week, with food sales up 5.6% and clothing and home sales up 14.0% in the period to to October 1.
“These advances mean we are facing the current market headwinds with an increased resilience and level of confidence,” commented Managing Director Stuart Machin.
Here’s how leading industry analysts rated its performance.
Russ Mold, AJ Bell
“British retail institution Marks & Spencer has done better lately, but is currently in a difficult situation.
“It doesn’t sit in the luxury space where customers are isolated from cost-of-living pressures, nor does it offer the kind of value offered by discount chains and grocers. Instead, Marks is stuck in something of a tight middle and that’s reflected in both a sharp drop in underlying earnings and a gloomy outlook.
“There were bright spots among the dark clouds with reasonably resilient commerce and the company enjoying decent fashion sales. It’s quite the turnaround from a period when Marks & Spencer’s tired sartorial offering was a veritable Achilles’ heel for the band.
“It is also a more efficient company with a stronger balance sheet to weather what is sure to be a difficult period. This position is a testament to the progress that has been made and Marks & Spencer shareholders hope that all of this will not be undone by the turmoil. current consumers.
Clive Black, Shoreline Capital
“Marks & Spencer released robust first half FY23 results which were slightly ahead of our expectations, with CPTP at £206m (SC estimate: £199m) vs. first half delivery FY22 of £222m excluding corporate rate relief FY23 guidance is unchanged except for the previously announced guidance updates from Ocado Retail, and we are happy to retain our CPTP guidance of £405m and EPS of 15.2p.
“Looking to FY24, with the UK macro outlook uncertain to say the least, we are also reiterating our FY24 CPTP forecast of £313m. “they can control, but we expect externalities (demand and cost inflation) to remain a challenge for all consumer-facing businesses.
“M&S is doing a good job for us on the other side of the road, which is evident in better business performance over the past two years. We have characterized the external environment as we see it extensively, for which the balance sheet is conservative. So in our view M&S is in good shape to weather whatever the economy throws at it, however our cautious outlook reflects the headwinds.”
Orwa Mohamad, Third Bridge
“Our experts say overall UK grocery market revenue will be flat or down over the next six months. Any growth in revenue will be driven by inflation.
“Margin erosion will continue for at least the next 12 to 18 months due to M&S’ positioning. Our experts say M&S has to absorb some inflation costs because it lacks the advantages of scale enjoyed by companies like Tesco. It will likely seek to reduce promotional activity first.
“This Christmas will be crucial for M&S. Much hinges on the grocer’s ability to persuade people to have a restaurant-like experience at home as they move away from restaurants and food delivery.
“The biggest challenge for M&S is to change its image from a second-hand store to a weekly store. There is a risk that a large number of occasional shoppers will simply remove the brand from their repertoire as reduce their discretionary spending.
Joe Dawson, Global Data
“M&S exceeded our sales expectations with a strong business performance in the first half of the 2022/23 financial year and delivered pre-tax profit of £208.5 million, an increase of 11.3% on compared to last year.However, it reported a 22.7% drop in operating profit (£280.7m), due to investments in pricing and technology, and the inflation driving up costs throughout the supply chain in food, GM and fuel divisions.
“Its food division outperformed the wider UK grocery market with sales up 5.6%, which can be attributed to an increase in store footfall outpacing a decrease in basket value, as The retailer’s emphasis on value for money, product innovation and high quality draws customers down from foodservice operators and restaurants, and appeals to those who want to feast in times more thoughtful spending.
“However, M&S food’s operating profit is down 50% due to price investments and higher inflation-related operating costs, as well as the lack of tax relief. trade tariffs and a withdrawal from Russia.
“M&S faces tough comparisons in the third quarter, but we expect it to be one of the strongest high street retailers this Christmas, gaining market share over GM and food ahead of rivals. Its strong commitment to value and quality will encourage consumers to invest, especially among gift shoppers, protecting it from price-driven operators.”
© 2022 European supermarket magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click on subscribe register for ESM: The European Supermarket Magazine.