M&S back in fashion: Shares hit 15-month high as food and clothes soar

Shares of Marks & Spencer rose to a 15-month high as investors cheered for signs that the turnaround plan is paying off.

In an optimistic streak of results, CEO Stuart Machin said that both the traditionally strong food division and the revitalized apparel and home division continued to grow sales and market share.

Total sales company-wide rose 9.6 per cent to £11.9 billion in the 22 months to April 1, while food rose 8.7 per cent and clothing and home increased 11.5 per cent.

With profits up 21.4 per cent to £475.7 million, the company pledged to reinstate the dividend in the autumn and increase its shares by 12.9 per cent or 21.15 pence to 184.75 pence.

“It feels like the longest turnaround in the company’s history, but there are finally signs that Marks & Spencer has found the right formula,” said Russ Mold, director of investment at AJ Bell.

“Instead of the usual story of strong food sales making up for weakness in clothing, both parts of the business are now doing well.”

Machin outlined his blueprint for overhauling M&S with co-chief executive Katie Bickerstaffe when they succeeded Steve Rowe in May last year.

The plan included further ridding M&S clothes of their dowdy image, boosting growth in both stores and online, and cutting costs by £400m over five years.

Machin reported its first full-year results yesterday, saying: “A year later, our strategy to reshape M&S for growth has led to continued trading momentum, with both companies continuing to increase sales and market share.”

With fashion ranges once widely condemned for missing the mark, clothing and home sales rose 11.5 per cent to £3.7 billion, five years after former boss Rowe vowed to ‘bring value and style back’ to his lines.

The division gained market share thanks to popular womenswear ranges, selling 1.6 million pairs of £22.50 pairs of jeans, while a £39.50 range of floral dresses is a bestseller.

It has also made money from a roster of around 140 partners, who have sold more than half a million dresses from brands such as Nobody’s Child, Sosandar and Ghost.

Sales of the food division – a long-standing success story – rose 8.7 per cent to £7.2 billion.

The turnaround at M&S ​​comes as rival John Lewis, owner of the eponymous department store company and Waitrose supermarkets, clashes.

And as an extra shot in the arm for shareholders, M&S said it would reintroduce a “modest” annual dividend after being suspended at the start of the 2020 Covid outbreak. Payments will start from the semi-annual trading update in November.

But M&S ​​said cost pressures remained high, with utility bills set to rise by more than £50m this year and wages by more than £100m.

The retailer expects a ‘modest turnover growth’ for the current financial year.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: ‘The announcement that dividends will be reinstated later in the year was the icing on the cake. Investors had plenty to cheer about and stocks jumped higher on the news.”

Worth more than Ocado

For the first time in five years, Marks & Spencer is worth more than its partner Ocado.

The increase in share price after the positive results gave the retailer a market capitalization of £3.6 billion.

Ocado, on the other hand, is valued at £3.4 billion, placing it on the brink of relegation to the FTSE 250.

Ocado’s value peaked at £24bn during the pandemic amid huge demand for online grocery shopping.