15th Aug 2023 11:59
(Alliance News) - Marks & Spencer Group PLC on Tuesday shared an improved outlook for its financial year in an unscheduled trading update, sending the stock soaring in midday trade.
Shares in the clothing, homewares and food retailer were up 6.9% at 218.85 pence in London on Tuesday around midday.
"There have been so many false dawns for Marks & Spencer over the years that it would be understandable if some observers remain sceptical, but its latest unscheduled update upgrading guidance is further evidence that something real is happening at the retailer," commented Russ Mould, investment director at AJ Bell.
Marks & Spencer said it has seen "continued market share growth" in Clothing & Home, as well as Food, in the first 19 weeks of its financial year.
Like-for-like Food sales grew over 11% in the 19 weeks to August 12, as the firm invested in quality and "sharpened" prices on its value lines.
Like-for-like sales in Clothing & Home grew over 6%, with strong growth in stores offset by more "subdued" growth online.
As a result, Marks & Spencer said it now expects the outcome for its financial year to show profit growth from the prior year. It also expects its interim results to reveal a "significant" improvement from previous expectations.
Analysts at UBS said, given Tuesday's strong trading update, it expects consensus pretax profit revisions in a double-digit percentage range.
Shore Capital was one of the first brokers to lift forecasts for financial 2024 on Tuesday, raising its pretax profit forecast by 9% to GBP550 million. In M&S's most recent financial year, which ended April 1, pretax profit totalled GBP475.7 million.
"We do sense a capability, competence, and confidence now within the business, something we have been signalling as building for some time, which suggests more resilience, more robustness, and perhaps that scope for the sequential earnings growth," Shore Capital said.
M&S is a house stock of Shore Capital.
However, M&S warned on Tuesday that "considerable" uncertainties about the economic outlook remain. There is also a risk that the consumer market will tighten as the year progresses, it added.
Despite the caution, Charlie Huggins, manager of the Quality Shares portfolio at Wealth Club, said there remain more reasons for optimism now than there have been for "some time".
"This is evidence that the UK consumer is still spending, despite the gloomy economic headlines," he said.
"The results are also testament to the group's progress against its strategy, launched last year. This 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."
M&S will publish its results for the 26 weeks ending September 30 on November 8.
By Heather Rydings, Alliance News senior economics reporter
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