Back in style: M&S has announced better-than-expected profits of £716m
Marks & Spencer is a national institution, which means it provokes strong feelings. These mixed feelings were on display this week after the 140-year-old retailer announced better-than-expected profits of £716m, thanks to a surge in fashion and food sales.
Skeptics preferred to see these results as temporary. But they seem unaware of the retailer’s progress. These have laid the foundations for further improvement.
As usual, M&S believers – myself included – smiled at the detractors’ comments and felt a little sorry for them. They enjoy neither food nor clothing and deprive themselves of possible future earnings.
It’s easy to see why some have a hard time having faith. For many years, stock performance was dismal. It even dropped out of the FTSE 100. A series of chairmen and chief executives promised to turn it around and failed.
So why should we believe things are different now?
In the words of chief executive Stuart Machin, the latest results are just “the beginning of a new M&S”. He has been the mastermind of what some consider a cultural revolution. But Machin is famous for being what he calls “positively dissatisfied”; in other words, a workaholic perfectionist.
You’re unlikely to be inclined to sit down in an M&S Scandi-style Copenhagen armchair, no matter how comfortable, and declare your mission accomplished.
I must thank the M&S cynics for my decision to buy their shares in 2022 and recommend them. I buy most of my wardrobe at the store.
At the time, Marks’ merchandising was somewhat boring, making it difficult for some to believe that he had actually bought him fancy suits.
Sometimes people even accused me of trying to pass off designer brand clothes as high street purchases.
I ignored this rudeness and supported the transformation of M&S’s clothing, food and home departments. It hoped it would boost performance, along with strategies such as adding brands such as Baujken and Hawes & Curtis to the online offering.
This has been the case: the company says it is in the best financial health since 1997.
Since November 2022, the shares have risen from 140p to 300p. Although this is a 114 percent increase, I have no intention of selling.
The stock is 35 percent below where it was a decade ago, so there’s still plenty of room to go. But I’m also betting on M&S’s ability to build on its achievements.
Additionally, the doubt that still surrounds it may be depressing the stock, meaning it will rally as it evaporates.
Ian Lance, co-director of the Temple Bar investment fund, says: “What’s so exciting is that this turnaround strategy looks like it has some way to go; however, this is not yet reflected in the share price as many investors remain skeptical about this.” the story of recovery.’ The share price of this trust, which has a stake in M&S and other well-known British names, is at a 7% discount to its net asset value, presenting what could be an economic opportunity to benefit from the recovery.
Signs of the determination to achieve this emerged when the profit figures were released.
The more effective Marks social media machine sent out a promotion on how to do a weekly grocery shop for £25. Households are being encouraged to see M&S not only as a source of complementary treats, but also as a provider of essential products at fair prices.
Although M&S operates a loyalty scheme, Machin does not favor “complicated” Tesco-type deals, where cardholders pay less but hand over personal details in the process. Chris Beckett, equity researcher at Quilter Cheviot, says: ‘M&S is taking market share from the larger supermarkets. As a result, it has the best profit margin in its class, although it remains downscale compared to the big four supermarkets.’
M&S should be able to take further advantage of this position.
As detailed in the results statement, “M&S’s leadership is expected to roll up its sleeves” throughout the new stage. And, as always, I will be a very interested observer.