M&S lifts profit guidance as sales bounce back over summer

UK food and clothing chain Marks & Spencer said it expected annual profits to be at the top end of expectations as it reported a sharp rise in revenues during the summer.

Assuming no further Covid-related restrictions on trading, M&S forecast adjusted profit before tax for the year to be above the upper end of previous guidance of £300m - £350m.

Group revenue surged 29.1% in the 19 weeks to August 14 and was 4.4% higher than 2019 before the Covid-19 pandemic struck and forced the closure of the retailer’s stores.

The company said that while there was an element of pent-up consumer demand, its offering was proving popular after several previous transformation programmes failed.

M&S has been working on improving its offering in the face of fierce competition from online rivals , trying to improving the quality and value of its clothing and food products, investing in technology and e-commerce, including a venture with internet supermarket Ocado .

The clothing and home division revenue jumped 92.2% on last year and was down just 2.6 on the pre-pandemic 2019. Food revenue jumped 10.8% on last year and 9.6% on the year before, with cost reduction programmes helping to offset inflation and disruption in the supply chain.

AJ Bell analyst Danni Hewson said M&S had struggled to keep pace with the changes in consumer habits and the shift to online shopping.

“It is early days but this encouraging news suggests Marks could be on the road to emulating Next which is excellent at combining its stores and its online capacity to get consumers the products they want when they want them," she said.

“One swallow does not make a summer, with pandemic risks and supply chain issues still to contend with, but Marks & Spencer’s confidence in lifting guidance so early in its financial year is undoubtedly a positive sign."

“The food business, which has come to the firm’s rescue time and time again in the last two decades, is still performing robustly and the joint venture with Ocado to provide a web-based offering for its produce is going well.”