As it reshapes to deliver long-term growth, M&S says it has delivered strong trading results across the year ended April 1st 2023, reporting a proﬁt before tax & adjusting items of £482m (down from £522.9m in 2021/22, which included £59.8m in UK business rates relief).
Clothing & Home sales were up +11.5% to £3.72b, resulting in an adjusted operating profit of £323.8m (£330.7m in 2021/22, including £35.2m rates relief). Volume and value market shares increased.
Store sales were up an impressive +14.9%, and online up +4.8%, which included strong growth in Click & Collect.
M&S says its structural cost reduction programme is delivering, adding that there are over £150m of savings planned for FY24, alongside an acceleration of store rotation – eight full-line and 10 Food stores are slated to open this financial year. Some 20 stores will be closed, 10 of which for relocation, including the opening of five new ‘flagship’ properties in Liverpool, Leeds, Manchester, Birmingham and Thurrock.
M&S says that Kidswear and Home offer "important potential for improvement in market share", and that, having established a stronger value position, its aim is to build increased awareness and appeal of the range – for instance, partnerships such as Fired Earth are being expanded across more categories.
Chief executive Stuart Machin says: "One year in, our strategy to reshape M&S for growth has driven sustained trading momentum, with both businesses continuing to grow sales and market share. Our Food and Clothing & Home businesses invested in value to protect customers from the full force of inflation which, whilst impacting margin, was the right thing to do, as serving our customers well is the only route to delivering for our shareholders.
"Food outperformed the market, with customer perception for quality and value the highest in six years. The benefits of the Gist acquisition and operational efficiencies also supported an improved performance in the second half. Clothing & Home retained market-leading value perception, and its style credentials continue to improve.
"Sales were up in store and online, supported by growth in Click and Collect sales, active app users and Sparks loyalty membership – demonstrating the emerging power of our omnichannel model. The store rotation and renewal programme delivered strong sales uplifts and will accelerate this year, including the opening of five brand-defining, full-line stores in major cities. Our disciplined approach to capital allocation means we can invest for growth, while further reducing net debt and maintaining investment grade credit metrics, and we plan to resume dividend payments at our interim results.
"M&S is such a special business with so much potential, and I want to thank all of my colleagues for their contribution to these results. Delivering performance and driving change is everyone’s responsibility at M&S, and they have done a remarkable job. Despite facing significant headwinds, I am encouraged by the strong foundations established last year and excited about what we can achieve in the year ahead."
During the year, the new leadership team – Stuart Machin, CEO, supported by his co-CEO Katie Bickerstaffe – set out their priorities to deliver sustainable growth, appointing Jeremy Townsend as CFO in January. M&S is targeting £400m of structural cost savings over five years, and its performance to date has prompted it to restore dividend payments in FY24.
M&S has also enjoyed a good start to the new financial year. It states: "While the economic outlook for consumer spending is uncertain, cost inflation remains high, and market conditions are expected to become more challenging, the strategy is beginning to deliver improved performance and there remains much within the group’s control.
"In FY24, modest growth is expected in revenues, driven by omnichannel as well as from the benefits of the accelerating store rotation plan. Further investment in quality and trusted value will be partly offset by actions to mitigate sourcing cost pressures and to reduce waste and stock loss.
"Cost inflation includes over £50m of energy costs as well as colleague pay increases of more than £100m, which are expected to be offset by the delivery of over £150m of in-year savings from the structural cost reduction programme. This gives scope to invest in customer service and digital development, while controlling costs.
"Despite facing significant headwinds, we are encouraged by the strong foundations established last year."
Commenting on the results, Julie Palmer, a partner at corporate insolvency and restructuring specialist Begbies Traynor, says: “After only a year, Stuart Machin’s strategy to reshape the high street stalwart is starting to bear fruit. If you strip out business rates relief, today’s results reveal a Marks & Spencer that is in fine form. As might be expected, food sales are on the rise, but it is the clothing and homeware business, which for years was a problem area, that has found its feet. Thanks to a fresh focus on fashions that the public want, rather than lagging competitors who were faster to deliver new trends, M&S is once again turning into a go-to provider of everyday clothes, as well as outfits for special occasions.
“The one area of concern is the joint venture with Ocado that slid into the red to the tune of £30m, as consumers continue to return to the high street after the pandemic, meaning the unit’s vast home delivery operation was under-utilised.
“Right at the start of the pandemic, M&S canned the dividend to protect the balance sheet and sink money into the business to help deliver the turnaround that today’s numbers reveal. It was a smart decision and one that is now providing relief for shareholders, with M&S saying it plans to restore a ‘modest’ payout to investors patient enough to have stuck with the company.
“While the retailer is forecasting only modest growth for the year ahead, there is now no reason why the refocused clothing and homeware proposition and its food business that’s outperforming the market can’t continue to capture market share from the likes of John Lewis.”