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Published
Nov 9, 2022
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M&S sales growth continues, but it warns of tough year to come

Published
Nov 9, 2022

M&S’s half-year results on Wednesday showed that the recovering retail giant continues to make progress as it reported higher sales for the half to 1 October. 


Photo: Sandra Halliday


While adjusted pre-tax profits were down, reported pre-tax profit rose, but it warned full-year profit would come in lower than the previous period on higher costs and the next financial year could be tough. However, it sees its consumers and categories as resilient in the face of a tough economy.

Profit before tax and adjusting items fell to £205.5 million from £269.4 million while statutory pre-tax profit rose to £208.5 million from £187.3 million.

Sales in its Clothing & Home (C&H) operation rose 14% with sales via physical stores up 18.8% and online up 4.9%. It saw growth in both market share and profitability with C&H adjusted operating profit up to £171.4 million from £128.4 million, reflecting the strong sales growth and full-price mix.

Its M&S Food sales operations also saw higher revenue, but its stake in Ocado Retail generated a loss of £0.7 million compared to a profit of £28.1 million a year ago. Yet Ocado remains key for driving customer growth.

International constant currency sales were up 13.7% and operating profit before adjustments rose to £39 million from £35.9 million.

CEO Stuart Machin said trading in the first half was “robust” as it grew ahead of the market, “reflecting the beginnings of a reshaped M&S”. 

He added that the programme to “renew and rotate our store estate is driving sales and quick paybacks, while the M&S App now accounts for over a third of online [C&H] sales”.

And he believes the progress being made “means we face the current market headwinds with an increased resilience and level of confidence”.

That confidence seems justified, given that the company is entering what’s traditionally its strongest quarter and continues to trade well. Trading in the first four weeks of H2 is in line with forecasts, with C&H sales up 4.2% and International up 4.1%. 

And while the CEO says it’s likely conditions will become more challenging in FY24, “the far-reaching changes made over the past few years, together with a reinvigorated product offer and strong value for money credentials provide some insulation from the gathering storm. In addition, the M&S customer base has slightly advantaged demographics”.

Fashion strength



Looking in more detail at the C&H performance, like-for-like sales rose 13.7%. Full-price sales participation was “broadly level on last year and well above the historic average”. Market share increased 50bps to 9.1% (Kantar data), and it generated growth across categories and channels. 

The high-double-digit sales rise through physical stores was driven by stores in city centres and malls, reflecting the return to more normal trading patterns, “although high streets continued to lag”. 

The rise in online sales meant e-tail made up 32% of C&H revenue, with continued strong growth in traffic and increased average order values, partly offset by higher returns rates. 

The company said the shape of buy has been improved, by removing duplication and deepening core product programmes while also investing in emerging growth categories such as kidswear and brands. 

Womenswear grew sales by 15% in the period despite 5% fewer options and the overall business had 276 lines achieving sales of £1 million+ in H1.

Importantly, womenswear generated strong growth in dresses, which were up by 50%+ and the 'holiday shop' also grew strongly. Men's formal shirts and smart wear were also up by over half, “reflecting improved availability and customers' focus on key occasions such as weddings”, while casual sales also grew. 

The company said it has huge opportunities to make the C&H supply chain more efficient and it has a major programme in place to do this.


Photo: Sandra Halliday


Another big opportunity comes in partnering with brands. From minimal activity three years ago Clothing, Home & Beauty brands sales more than doubled to £70 million+ in the period. In the new year, a broader sports offer will be launched.

It has already talked about accelerating its programme to maximise the profitability of its physical estate by store revamps, opening more food stores, closing some that carry C&H, and opening more full-line stores in strong locations on more attractive leasing terms.

It’s also investing heavily in technology from RFID to data and maximising the omnichannel experience.

International growth



Looking at its International arm, the company said that along with the 13.7% revenue rise, the business generated an operating profit before adjusting items of £39 million, up from £35.9 million.

Growth was driven by C&H sales in key markets including India, where revenue doubled following the effects of Covid lockdowns on the business last year. On a constant currency basis, overall store sales were up 19%, while online sales declined 9%, but were still up 150% on pre-Covid levels.

It has an ambitious programme of expansion with Reliance Retail through its India joint venture. This includes increasing the product offer in growth categories such as kidswear, the global rollout of the Sparks loyalty programme, and continuing to seek opportunities for new space. 

It added that the business in the Republic of Ireland generated a strong sales performance in C&H, but the Food business continued to be impacted by substantial costs and disruption related to EU border processes.

Tough times ahead



For the future, it’s upbeat about the rest of the financial year but sees mounting pressures for the next year. It said that “in highly uncertain market conditions, there is a large variation in plausible forecasts for customer demand. We are planning on a material contraction in market demand [but] the M&S customer may prove more resilient than some market commentators assume”.

Its broad base of customers has “on average, slightly higher incomes and age demographics in both Clothing & Home and Food”.  

Its C&H operation also has market share positions of more than 15% in categories “which are less acutely exposed to discretionary spend, such as leggings, underwear, sleepwear and school uniforms”. These accounted for 60%+ of C&H sales in the past year”.

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