M&S hails ‘good start’ to turnaround strategy as sales jump despite profits dip

‘We do expect things to get a bit better’ says chief executive Stuart Machin

Henry Saker-Clark
Wednesday 24 May 2023 12:58 BST
Inflation falls to lowest level in over a year

Marks & Spencer has revealed a jump in sales revenue due to higher prices, but profits have dipped over the past year on the back of higher costs.

The high street chain said sales grew in both its clothing and homeware, and food divisions over the year to April, and profits were better than expected despite being down on last year.

The retailer hailed the performance as evidence of progress in its turnaround plan, which has seen it shut dozens of its larger stores amid an overhaul of its store portfolio.

It said better clothing ranges and refurbished stores played a significant part in the improvement in trading.

Total revenues for the business grew by 9.6 per cent to £11.9 billion, compared with the previous year.

Clothing and home sales lifted by 11.5 per cent to £3.72 billion, after a significant rise in store sales, with shoppers flocking back to the high street after the impact of Covid-19.

Meanwhile, sales in its food operation grew by 8.7 per cent to £7.22 billion, against the year prior.

M&S also told shareholders it has witnessed a “good start” to the new financial year, despite an “uncertain” outlook for consumer spending.

We have some products coming down from peaks, but for other things like eggs they are still significantly higher than they were a year ago

Stuart Machin, M&S chief executive

It comes amid continued high levels of inflation for British households.

Fresh figures from the Office for National Statistics on Wednesday showed that food CPI (Consumer Prices Index) inflation struck 19.3 per cent last month, although this reflected a slight drop against March’s data.

Stuart Machin, M&S chief executive, said the company expects recent price increases “to soften” but stressed there is still inflationary pressure in its supply chain due to higher labour costs and some commodity price rises.

He said: “Yes, we do expect things to get a bit better and we have already been able to reduce the price of some items like milk.

“As soon as the cost of products comes down we will pass that on to the customer.

“We have some products coming down from peaks, but for other things like eggs they are still significantly higher than they were a year ago.

“I’m sure things will recede and get a bit better. There is still uncertainty but hopefully we will see more of this by autumn.”

It came as the London-listed company posted a profit before tax and adjusting items of £482 million for the year, down from £522.9 million last year.

The retailer said the figure, which was above analyst predictions, was partly lower due to the loss of pandemic-era business rates relief from the government.

It also highlighted continued cost inflation for both clothing and food divisions.

The company said it also expects to face more than £50 million of energy cost rises and more than £100 million in staff pay increases over the coming year, but stressed plans to offset this by its cost-cutting plan designed to secure a further £150 million a year.

Mr Machin added: “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 and 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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