Marks and Spencer’s (LON:MKS) shares have been in demand this morning, after the fashion retailer’s half-year results suggested an improvement in performance.
M&S said in a regulatory statement today that group sales had advanced 1.4 percent to £5 billion in the 26 weeks to 26 September. Underlying pre-tax profit was also up, rising 6.1 percent to £284 million. Earnings per share climbed 4.9 percent to 14.1p.
The company’s food division boosted sales by 3.3 percent and 0.2 percent on a like-for-like basis, on the back of 32 "Simply Food" store format openings. Online business was another bright spot, with M&S.com sales rising 34.2 percent. Total general merchandise (GM) sales, which include clothing, footwear and homeware, fell 0.4 percent and 1.2 percent on a like-for-like basis due to what M&S described as unseasonal conditions and a decision to focus on full price sales. International revenues were down 5.1 percent, and while sales in Asia continued to grow, M&S’ performance in Europe was significantly impacted by the exchange rate as it absorbed the costs instead of increasing prices.
CEO Marc Bolland said that the retailer had made strong progress against its key priorities. "Our food business again outperformed the market by over 3 percentage points as our focus on quality and innovation continues to set us apart. In general merchandise we decided to improve profitability by focusing on gross margin, delivering another significant increase, which in part resulted in slightly lower sales.” Bolland stated. He added that due to M&S’ good performance and strong cash generation it has increased its interim dividend by 6.3 percent to 6.8p per share.
Industry analyst Bryan Roberts at Kantar Retail said the combination of unhelpful weather and deepening competition in the fashion market were to blame for M&S's weak general merchandise sales figures. However, he said there is an upside to the figures. "Profitability is being assisted through a long-overdue consolidation in procurement and more disciplined discounting. Food, meanwhile, continues to tick along respectably thanks to ongoing innovation and seasonal excellence," Roberts added.