Marks and Spencer sparkles as it restores the dividend
|Over a year ago the Marks and Spencer share price was at 2-year lows and not far off its pandemic lows of 2020 as pessimism abounded about the UK economy.
Since then, the share price has more than doubled and while it has not recovered back to its 2022 peaks it's not far off, returning to the FTSE100 in the process, although in recent months the upward momentum has stalled.
The turnaround plan first initiated by previous CEO Steve Rowe has gone from strength to strength over new CEO Stuart Machin, controversial Christmas ads notwithstanding.
In May, the retailer announced a strong set of full year numbers with statutory revenue rising by 9.6% to £11.93bn, £1bn higher than last year and well above expectations of £11.7bn, with a strong performance from both food and general merchandise. At the time management floated the prospect of a return of the dividend in the upcoming fiscal year.
A profit upgrade in August reinforced this optimism and today’s H1 numbers have seen management replay that optimism with an interim dividend of 1p per share, sending the shares sharply higher.
H1 profits before tax rose 56.2% to £325.6m on the back of a 10.8% rise in statutory revenue to £6.13bn. Management have also managed to reduce net debt by £370m as well as returning to a positive cash flow situation.
On the actual sales numbers themselves, food retail was once again a standout performer, with 11.7% increase in like for like sales, along with an improvement in operating margin, while in general merchandising like for like sales rose 5.5%.
The Ocado business also showed signs of an improvement customer wise, even though losses there increased to -£23.4m.
There was a minor sting in the tail with management warning that H2 was looking increasingly uncertain even with the prospect of a positive Christmas trading period, and that pre-tax profit was likely to be weighted towards the last 6 months.
Having said that October trading momentum has been positive according to management, although the caution over the second half of the year is understandable given the combined impact of a higher interest rates environment, concerns about a slowing economy, and deflationary forces impacting consumer sentiment, along with an uncertain geopolitical outlook.
All in all, despite the heavy pessimism around the UK economy, the fact that we've seen positive updates from Next, Associated British Foods owner Primark and now M&S suggests that while the economic backdrop is difficult it’s not all bad news.
Something to hold onto perhaps as the nights get longer into year end.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.