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 “a significant improvement” 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 “robust” and it was making “good progress” 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 women’s football team.
“The retailer will have benefited from the popularity of the Women’s World Cup, having collaborated with England’s senior women’s team to produce a range of tailored pieces that have been worn by the Lionesses throughout the tournament,” Dawson said.
“Another football adjacent programme has been the retailer’s Eat Well, Play Well campaign, featuring members of the UK’s national football teams as well as prominent figures in the community promoting healthier lifestyles and urging shoppers to ‘follow the flower’, in reference to M&S’s healthy food branding.”
The analyst Clive Black of Shore Capital raised his forecast for M&S’s profits for this year by 9%.
M&S said: “There 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.”
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: “Following on the heels from Next’s 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.
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“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.
“Today’s trading update suggests this plan is resonating with consumers, with M&S continuing to increase its market share in clothing and home.”
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 “no choice but to review its future position” 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 £4.3bn, enough to qualify to return to the FTSE 100 blue-chip share index, on today’s 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.
