“Improved style perceptions and a sustained leading value positon” in M&S Clothing & Home unit have helped to drive performance in the 52 weeks to 1 April, with the arm booking an adjusting operating profit of £323.8m (US$400.9m), marginally lower than the £330.7m booked in the same period last year with a sales uplift offset by inflationary effects and increased costs.

Clothing & Home at M&S saw sales growth of 11.5% to £3.72bn. Store sales were up 14.9% and online was up 4.8%.

M&S group sales rose by 9.6% to £11.9bn compared to last year’s results of close to £11bn. Although, operating profit before adjusting items at the business dropped to 11.6% to £626.6bm. Profit before tax was £475.7m.

M&S disclosed the costs of its UK stores and remodelling new stores, which came to £70.5bn and £55bn.

M&S’s online adjusted operating profit margin reduced to 5% from 9.1%, due to sourcing cost pressures which reduced gross margin and planned investments in digital and omnichannel improvements to drive future growth.

Stuart Machin, chief executive at M&S said: “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.

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“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 omni-channel 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.”

Forward planning for success

Going forward M&S says its priorities to drive profitable sales growth, improve operating margins, provide investment choices and drive shareholder returns are:

  • Developing exceptional products worthy of a trusted brand, through investment in great tasting, value for money, quality Food, and developing stylish, great value, quality Clothing and Home ranges.  
  • Driving omni-channel growth.  Increasing the participation of Clothing & Home online sales, through leveraging the national store and distribution network, to offer a convenient and consistent service however and wherever customers choose to shop.  And growing utilisation of Ocado Retail’s capacity, by providing superior service, market-leading choice and M&S products.
  • Capitalising on the strength of the M&S brand to grow global sales through capital light partnerships and the development of a multi-platform online business.
  • Making £400m of structural cost savings over five years, reducing cost to serve, and growing our margins through technology improvements to increase retail and supply chain efficiency and simplified and streamlined digital, technology and support centre functions.
  • Creating a high-performance culture. A simpler, faster, delivery focused business which is passionate about M&S products, puts the customer first and has the digital skill set to make fast, informed decisions. 
  • Accelerating store rotation and renewal to create a more productive estate of c.180 full-line stores and opening more than 100 new Food stores positioned in growth locations, which support omni-channel retailing.
  • Modernising the supply chain to improve availability and customer service, while reducing costs and working capital.
  • Creating a more engaging and connected customer experience to drive omni-channel growth. This brings together the Sparks loyalty programme and payment options, supported by an effective and more efficient technology infrastructure.
  • Disciplined capital allocation, to strengthen the balance sheet, reinstate an investment grade rating for our debt and restore dividends. Robust liquidity and balance sheet metrics allow for a further bond repurchase exercise of c.£225m in respect of our medium-term maturities.

Industry reaction

Charlie Huggins, manager of the quality shares portfolio at Wealth Club says that despite a difficult trading environment M&S has delivered solid results, with notable progress in Clothing and Home.

“With the new year having got off to a good start and plans to reinstate dividends, the turnaround plan to revitalise the brand and reignite growth appears on track.

“The Clothing and Home division has been a problem child for M&S for many years. The new strategy, launched last year, aims to improve brand perception and designs, reduce discounting, and improve the online offering while taking a knife to costs and instilling a more entrepreneurial culture. Early signs are this plan is resonating with consumers with M&S increasing its market share in clothing and footwear during the year.

“It is too early for M&S to declare victory. M&S shareholders are all too aware that one swallow doesn’t make a summer. M&S needs to sustain growth in sales and get margins moving in the right direction. This will be difficult given a backdrop of intense cost pressures. Nevertheless, there are more reasons for optimism now than there have been for some time.”