Marks & Spencer has notched up a better-than-expected jump in half-year profits thanks to buoyant food and clothing trading, but cautioned over an “uncertain” consumer backdrop and rising costs.
The retail bellwether reported underlying pre-tax profits up 17.2% to £407.8 million for the six months to September 28 as a turnaround plan continues to pay off.
Like-for-like sales rose 7.5% across its food business and increased 5.3% in its clothing and home division, after a bounce back in demand for fashion ranges in the second quarter thanks to more seasonal weather.
Group chief executive Stuart Machin said the long-term impact of recent measures announced in the Budget was “for now uncertain”.
During the first half of the year, cost inflation has continued to be elevated, running well ahead of price inflation and the consumer environment has been uncertain
M&S added that an “uncertain” consumer backdrop and cost pressures would continue into its second half.
It said: “During the first half of the year, cost inflation has continued to be elevated, running well ahead of price inflation and the consumer environment has been uncertain.
“Despite this, the business has traded well, growing volume and value market share.
“As we enter the second half, we expect this backdrop to persist.”
But it said trading was on track in the first five weeks of its second half and that it was “confident of making further progress in the remainder of the year”.
The firm’s figures showed that on a statutory basis, pre-tax profits rose by 20.4% to £391.9 million over the first half.
Shares lifted 3% after the figures.
In the spirit of being positively dissatisfied, we have so much to do over this year and beyond
However, the results showed the impact of soaring cost pressures, with the firm’s wages bill up 10% after retailers were hit hard by the increase in the minimum wage earlier this year.
M&S said cost actions have driven savings of around £60 million in the half-year, which it said “largely” offset inflation.
Mr Machin cheered a strong result, but said there was “much to do”.
He said: “The easy thing to do today would simply be to say that these are good results, but that wouldn’t be the right thing to do.
“In the spirit of being positively dissatisfied, we have so much to do over this year and beyond.
“Despite our strong trading momentum, there is much more opportunity for future growth and that energises us.”
The company has been pressing ahead with a revamp plan in recent years, led by Mr Machin, including heavy cost-cutting and store closures, after previous attempts to regain its former glory fell short of the mark.
In May, it declared that the group was in its strongest financial health for nearly 30 years and was seeing the “the beginnings of a new M&S” as it posted a 58% surge in annual profits.
