25th May 2022 15:13
(Alliance News) - The jury is largely still out on Marks & Spencer Group PLC, though analysts on Wednesday noted outgoing boss Steve Rowe has left the retailer in a better state than he found it in.
The FTSE 250 constituent's full-year numbers largely impressed analysts, though its outlook less so, as M&S warned on profit growth for the year ahead.
Still, the stock managed to stave off the sort of sell-offs some retailing peers in the US suffered last week. M&S shares were up 1.0% at 133.39 pence each in London on Wednesday afternoon.
Last week, the likes of Walmart Inc, Ross Stores Inc and Target Corp suffered hefty share price slides after warning about inflation and consumer confidence.
"Given how many of the US supermarket companies saw their share prices tank on their latest updates, investors in Marks & Spencer will be breathing a sigh of relief it hasn't done the same. The fact the shares managed to rise 1% following the results should be taken as a positive, particularly given the gloomy outlook," AJ Bell analyst Russ Mould commented.
The clothing, homewares and food retailer reported a swing to profit for the year ended April 2, but cautioned on profit in the year ahead, amid the war in Ukraine and investment plans.
Revenue for the recently ended financial year climbed 19% to GBP10.89 billion from GBP9.17 billion.
M&S swung to a pretax profit of GBP391.7 million from a GBP209.4 million loss. Adjusted pretax profit jumped to GBP522.9 million from GBP50.3 million.
The company will not benefit from business rates relief and it will not see a profit contribution from Russia, as it exits that market in the wake of the war in Ukraine.
"Consequently, we start 2022-23 from a lower adjusted profit base. The business is now much better positioned and has had an encouraging start to the year. However, given the increasing cost pressures and consumer uncertainty, we do not currently expect to progress from this lower profit base in 2022-23," M&S warned.
M&S said it is preparing for an "adverse impact on volumes due to price inflation". It said price inflation will hit "the rate of sales growth".
AJ Bell's Mould added: "The new leadership team will need to have some creative ideas to keep the tills ringing. They will also need to show the value of the company's Sparks loyalty scheme. Despite amassing more than 15 million members, is it analysing this data to the best use?"
M&S in March announced Chief Executive Steve Rowe will depart. He joined the company straight out of school at age 15 and has been CEO since 2016.
His departure as CEO was effective following the release of the annual results. He will leave the company at July 5 but be available as an adviser for up to another 12 months.
The company promoted Stuart Machin to chief executive, responsible for day-to-day leadership of the business and of its executive committee.
AJ Bell's Mould said Rowe's tenure ended on a high, with M&S "showing resilience which the company arguably lacked" before he became boss.
There is still plenty of work to be done, particularly in light of the cost pressures the firm faces, Interactive Investor analyst Richard Hunter commented.
The analyst said progress has been made at M&S's Clothing unit, which has long been its laggard.
"For all the progress, the share price has been held back by any number of factors and given the outlook comments this could continue to be the case. Quite apart from the effects of declining real incomes as inflation persists, M&S has highlighted some headwinds which will result in a lower profit base for the current year," Hunter explained.
Hunter added: "Market consensus for the shares remains cautious, with the general view of the shares as a hold leaving the jury out as the company continues its attempts to revitalise its fortunes."
By Eric Cunha; ericcunha@alliancenews.com
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