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Marks & Spencer profits soar to £716m as food and clothes revamp pays off

Marks & Spencer smashed expectations with a 58 per cent rise in annual profit, as its strategy to revamp the business delivered strong sales growth in both its food and clothing divisions.

The food, clothing and homeware group reported better-than-expected pre-tax profit of £716m last year and said it was confident of further progress in its new financial year.

Sales rose 9.4 per cent to £13.1bn, with food sales up 13 per cent and clothing and home sales up 5.3 per cent. It enjoyed a strong Christmas with a 7.2 per cent rise in total sales in the three months to the end of December. 

“Given our track record of delivering volume growth, market share and free cash flow we are confident that we will make further progress in 2024-25 and beyond,” M&S said.

The retailer said both its food and clothing divisions delivered three years of growth, boosted by initiatives to improve the quality and pricing of its goods.

Stuart Machin, M&S chief executive, said the firm was reaping the rewards of an expensive investment programme to improve the quality and value of its clothing and food, overhaul its stores as well as improving its online operations.

It is also benefitting from the fact that many of its former high street rivals, including BHS, Debenhams and House of Fraser, have either collapsed completely or seen dozens of their stores closed. Many others have failed to transition to the modern retail world. The removal of these rivals has helped Marks & Spencer grow market share.

Mr Machin said: “Two years into our plan to ‘reshape for growth’ we can see the beginnings of a new M&S. Food and clothing and home grew volume and value share ahead of the market and sales increased across stores and online.

“Both businesses have now delivered 12 consecutive quarters of sales growth and this trading momentum gives us wind in our sails, and confidence that our plan is working.”

He said the retailer couldn’t rest on its laurels. “There remains much work to do”, he said. “We need to move faster and be ruthlessly challenging on the areas where progress has been slower, building a more effective digital and technology infrastructure, accelerating the move to a truly personalised customer experience, and resetting priorities in international,” he said.

It also said it will step up cost cuts in the year ahead. M&S said it was raising its five-year plan for cost cuts by £100m to £500m by 2028.

The retailer said that the financial performance of Ocado Retail remained disappointing but it was beginning to see improvements. Revenue increased 11.2 per cent to £2.47bn, while earnings came in at £26.8m against a loss of £15.1m last year.

M&S insisted there is “enormous opportunity” within the online retailer. “We believe the Ocado Retail model of automated fulfilment powered by Ocado technology, and M&S product, could be the most competitive model for online grocery sales in the UK.”

“There is enormous opportunity to improve trust in value, website experience, logistics, and supply chain, which will be the focus for the next two to three years,” it added.

Garry White, investment specialist at Charles Stanley, said: “The long-awaited turnaround of Marks & Spencer has officially arrived. Annual revenues and pre-tax profits were significantly ahead of market expectations after market-leading growth in its food business. Food and clothing and home grew volume and value share ahead of the market and sales increased across stores and online.

“It has also seen a significant improvement in its clothing ranges and its food business has been powering ahead. It is clear from the figures that M&S Food is gaining new customers and broadening its appeal.

“The group is two years into its “reshaping for growth” strategy and it is delivering in terms of sales, market share and margins. Despite a tough consumer backdrop, this is M&S’s highest profit in a decade, so meal deals all round at lunchtime.”

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