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Marks & Spencer Group PLC on Wednesday reported a swing to full-year profit, due to a good recovery in footfall.
However, the London-based clothing, homewares and food retailer cautioned on profit in the year ahead, amid the war in Ukraine and investment plans.
M&S swung to a pretax profit of £391.7 million in the year ended April 2, from a loss of £209.4 million the year before. Adjusted pretax profit jumped to £522.9 million from £50.3 million.
This was on a revenue rise of 19% to £10.89 billion from £9.17 billion.
The FTSE-250 company credited this to ‘strong all-round performance,’ specifically by M&S Food. The business delivered sales growth of 10% in the year, alongside good market share growth. Further, the results were supported by a good recovery in footfall and a ‘gradual recovery’ of stores in city centres.
Like last year, M&S did not declare a dividend. However, the FTSE 250 said it will consider the scale and timing of a resumption of dividends at ‘year-end.’
M&S said trading in the first six weeks of the new financial year has improved annually.
Looking ahead, the retailer warned that the business will not receive business rates relief this year. Further, its International business will not see a profit contribution from Russia.
‘While we have provided for the £31 million cost of fully exiting Russia and business disruption in Ukraine, and will incur a loss of contribution, we are also exploring multiple opportunities for further growth, including through the Reliance joint venture in India,’ M&S said.
The company anticipates a ‘minimal contribution’ of share of net income to group results, as it invests in capacity growth at Ocado Retail. M&S owns a 50% stake in the business.
M&S also expects capital expenditure to increase by 33% to around £400 million in the coming year, from £300.2 million, as it continues to invest in growth.
‘Consequently, we start 2022-23 from a lower adjusted profit base. The business is now much better positioned and has had an encouraging start to the year. However, given the increasing cost pressures and consumer uncertainty we do not currently expect to progress from this lower profit base in 2022-23,’ the company said.
M&S said it is preparing for an ‘adverse impact on volumes due to price inflation’. It said price inflation will slow ‘the rate of sales growth’.
‘M&S's premium brand positioning [for food] means they are less vulnerable to the pressure from discounters and many of the shoppers they do lose will be replaced by new customers trading down from eating out,’ commented Ross Hindle, an analyst at research house Third Bridge.
He added: ‘As M&S continues its transformation programme, benefits are expected to continue to flow to shareholders. However, one concern does remain around M&S's clothing range which once again finds itself in no-mans land between affordable and premium clothing.’
Separately, the retailer said it has opened a tender offer for its £300.0 million 3.0% 2023 notes and £400.0 million 4.75% 2025 notes.
M&S shares were trading 0.5% higher at 132.97 pence each in London on Wednesday morning.
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