An overhaul of its apparel business helped Marks & Spencer raise its profit outlook for the second time in less than three months, but it warned of soaring costs and disruption due to chain issues. supply.
M&S said its strong performance in the six months to October reflected a 10% increase in food sales as well as a “substantial improvement” in its once ailing clothing and housewares division.
Managing Director Steve Rowe said both sides of the company were making “significant market share gains” and added that “the tough yards of long-term change are starting to show in our performance.”
Together, they helped push pre-tax profits to £ 187million for the half-year, from a loss of almost £ 88million in the same period in 2020. The figure also blew up past earnings as well. to the £ 159million pandemic, and Rowe said he was ‘clear the underlying performance is improving’.
The group expects underlying earnings for the full year to beat expectations, now standing at around £ 500million.
Overall, sales for the company’s redesigned apparel and home businesses declined 1%, although online sales continued to grow, increasing 61% over the period. This helped offset an almost 18% drop in sales in department stores.
The company’s clothing division has been struggling since before the coronavirus pandemic, with sales falling for eight consecutive years. The business faced additional challenges early in the outbreak when non-essential retailers were forced to close their street stores to customers during the lockdown.
However, M&S said in its results on Wednesday that a ‘reengineering’ of the apparel and home sector, which included reducing its offering to a more targeted line of items and reducing promotions, “was now demonstrating its potential. to reverse the years of decline ”.
Rowe also attributed the company’s overall performance to a ‘Covid rebound’, but warned the retailer still faces headwinds, including Brexit and the pandemic, which could continue into the next year.
‘Well-publicized supply chain pressure, combined with pandemic supply interruptions, rising labor costs, challenges at EU borders and tax increases , means that the cost slope becomes stronger in the second half of the year and even stronger in the year 2022-2023, ”he said. “This will increase the importance of our productivity plans, store turnover and our technology investments. ”
Despite these pressures, the group said pre-tax profits are expected to exceed expectations, raising them to around £ 500million for the full year, from £ 403million in 2020. M&S had already raised its guidance in August to over £ 350million.
Last week, M&S said it had already sold more than 40% of its range of Christmas food orders online – including the bigger turkeys, puddings and its Brussels sprout gratin, as shoppers attempted to get a head start on holiday shopping. However, he said he expected new deliveries to arrive in November and December.