Marks & Spencer’s comeback is one of the most remarkable turnarounds.
Other major retailers such as Debenhams and Topshop disappeared from the high street, and shopping centers and pandemic startups ASOS and Boohoo are in the doldrums.
As broker Shore Capital colorfully noted, M&S chairman Archie Norman and now CEO Stuart Machin ‘blew the bloody doors off’.
The figures are impressive: pre-tax profits are up 56 per cent to £325.6m in the six months to September, retail sales are soaring and after a long hiatus there is a dividend.
We have become accustomed to Next, which is particularly cautious and adjusts its predictions upwards.
Upturn: Marks & Spencer’s pre-tax profits rise 56% to £325.6m in the six months to September, same-store sales soar and dividends are in place after a long hiatus
But for M&S it’s a refreshing phenomenon with a full-year projection of £640 million, up from £575 million. Long-suffering private investors (including this writer) have reason to be optimistic.
Much of the focus of M&S’s revival will be on its store renewal program – the move from underperforming high street stores to sites in better retail locations such as Trafford Park and Lakeside.
The quest for better shopping is symbolized by the battle over the Marble Arch development, with Machin taking Michael Gove’s decision to withdraw planning permission for Oxford Street to judicial review.
The supply chain is being renewed, which results in cost savings. Food innovation continues at a rapid pace and anyone in an M&S food hall can’t help but be impressed by the quality, British provenance and footfall.
On the fashion side, the core of the business, smarter brands Jaeger, Autograph and Per Una are making a real splash.
What’s really encouraging is that younger shoppers, who in the past thought M&S is for parents and grandparents, are now engaged. The average age of customers is decreasing rapidly.
One of the biggest changes in the Machin Age is culture. Colleagues at all levels will have a much greater voice in the strategy and that should be good for productivity.
No one should think that the best of recovery is over.
In the weeks since the end of the first half of the year, M&S has taken the wind out of its sails in terms of market share and volumes. More must follow.
Ocado retail, bought by Norman, was a disappointment. Machin believes that with Hannah Gibson at the helm, it will ultimately be a growth engine. In addition, the store renovation program is progressing steadily.
Every time there is an upgrade in location and shopping experience, Liverpool is a good example, revenues rise sharply. That also bodes well.
Machin says he is ‘positively dissatisfied’, which reflects his ambition. Investors clearly agree with a price increase of almost 10 percent.
Historically, M&S has enjoyed the highest share price valuation in the UK retail sector. That status was lost during two decades of underperformance.
Now there’s a chance it could regain the top ground.
Even wider and wider
Who said it was all over for Rolls-Royce and wide-body jets?
The engineering group’s shares are rising with a take-off powered by the Trent engine family.
The leaders are the airlines from the Middle East, Japan, Europe and the rest of Asia. China remains strong, despite a slight setback.
Warren East managed to steer Rolls out of near-financial ruin during the pandemic.
A recovering market and robust cost savings by successor Tufan Erginbilgic ensure a remarkable recovery.
There is much more to do with global defense needs increasing and the great opportunity of small modular reactors (SMRs) at home and abroad using Rolls-Royce turbines that currently power submarines.
As cash flow increases and upgrades roll in, shares fly higher.
Lost love
One British emblematic brand losing momentum is broadcaster ITV.
Revenue rose in the first nine months of the year despite a dip in advertising, but the studio growth engine is performing less well than expected.
Longer term, betting on content in the streaming age has to be the way to go.
On the plus side, ITVX, just a year old, is confusing the naysayers and building digital revenue.
The negativity is overcooked.