Marks & Spencer has upgraded its profit forecast after a rise in demand for holidaywear and a jump in food sales.
The high street retailer said it anticipated higher profits for the financial year, unexpectedly upgrading its outlook after growing its market share in food, clothing and homeware.
In an unscheduled update to the City, M&S told investors that its interim results, due to be published in November, would show âa significant improvementâ against previous expectations.
It said in the first 19 weeks of the financial year, like-for-like food sales grew 11% and clothing and homeware sales rose by more than 6%.
There was considerable growth in sales of the M&S holiday range between April and June, with a 46% increase in sales of beachwear and 22% rise in sales of linen.
The company said its operating margin had continued to be ârobustâ and it was making âgood progressâ on its programme to reshape its business.
Joe Dawson, a retail analyst at GlobalData, said M&S benefited from shoppers preparing for holidays abroad, and from its tie-up with the England womenâs football team.
âThe retailer will have benefited from the popularity of the Womenâs World Cup, having collaborated with Englandâs senior womenâs team to produce a range of tailored pieces that have been worn by the Lionesses throughout the tournament,â Dawson said.
âAnother football adjacent programme has been the retailerâs Eat Well, Play Well campaign, featuring members of the UKâs national football teams as well as prominent figures in the community promoting healthier lifestyles and urging shoppers to âfollow the flowerâ, in reference to M&Sâs healthy food branding.â
The analyst Clive Black of Shore Capital raised his forecast for M&Sâs profits for this year by 9%.
M&S said: âThere remain considerable uncertainties about the economic outlook, and there is a risk that the consumer market will tighten as the year progresses. Nevertheless, we now expect the outcome for the year to show profit growth on 2022-23, and the interim results to show a significant improvement against previous expectations.â
The boost in sales comes despite the cost of living crisis squeezing consumer incomes, and comes weeks after the clothing retailer Next upgraded its profit forecast after shoppers flocked to the summer sales.
Charlie Huggins, the manager of the Quality Shares Portfolio at Wealth Club, said: âFollowing on the heels from Nextâs recent profit upgrade, M&S has also announced that it expects profit for the year to be above expectations. This is evidence that the UK consumer is still spending, despite the gloomy economic headlines.
after newsletter promotion
âThe results are also testament to the groupâs 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.
âTodayâs trading update suggests this plan is resonating with consumers, with M&S continuing to increase its market share in clothing and home.â
Last month the retailer was refused permission to demolish and rebuild its main store on Oxford Street. Michael Gove, the secretary of state for the Department for Levelling Up, Housing and Communities, disagreed with inspectors and decided to deny permission for the plan.
Stuart Machin, the chief executive of M&S, said the decision meant the retailer had âno choice but to review its future positionâ in the heart of the West End of London.
M&S shares had risen by 6.7% by Tuesday afternoon, and hit their highest level since February 2022. This lifted its market capitalisation up to ÂŁ4.3bn, enough to qualify to return to the FTSE 100 blue-chip share index, on todayâs prices.
The retailer fell out of the FTSE 100 in 2019, after a 35-year run in the index, following a drop in its share price. The next FTSE reshuffle is due in September, and M&S is now worth enough to qualify for a return. To enter the blue-chip index, a company would need to rise to the 90th position or higher.
