M&S’s full-year results on Wednesday offered further evidence of the strength of its turnaround with the UK retail giant reporting higher sales and headline profits, although operating profits were dented by tough comparisons and higher costs. And it was particularly good news that clothing sales rose healthily.
Group statutory revenue rose 9.6% to £11.93 billion with group sales up 9.9% to £11.98 billion. UK Clothing & Home sales rose 11.5% to £3.71 billion and International sales were up 12.6% at just over £1 billion.
That said, operating profit before adjusting items fell 11.6% to £626.6 million. Higher energy prices, labour costs and its share of losses from its Ocado joint venture weighed on the figures, but a particular issue was a tough comparison with the prior year when it had benefited from £60 million in UK business rates relief.
Profit on the same basis for Clothing & Home was down 2.1% at £323.8 million (again, dented by the business rates relief issue). International profit rose 15.2% to £84.8 million.
Pre-tax/pre-adjusting items profit fell 7.8% to £482 million. Meanwhile statutory profit before tax rose, 21.4% to £475.7 million and net profit was up 18% at £364.5 million.
The company is clearly moving in the right direction and the Clothing & Home performance was undeniably good with like-for-like sales up 11.2%, “driven by a more confident approach to buying and a focus on the modern mainstream customer, which is starting to drive better style perceptions”.
With both store (+14.9%) and online (+4.8%) sales rising, volume and value market shares increased and it saw 20% growth in click & collect.
And the International sales growth included a rise of 11.2% at constant currency that was “driven by demand for clothing from global partners”. As a result, profits recovered despite the combined impacts of the exit from Russia and on-going EU border-related costs.
The company has also seen a “good start” to the new financial year, with both Food and Clothing & Home growing sales, despite tough conditions out there.
CLOTHING SALES GET BETTER AND BETTER
The company expects the Clothing & Home momentum to contrite and the objective is to deliver a 1% increase in market share and an adjusted operating margin of around 10% over the next five years.
In the latest year, in addition to the Clothing & Home figures already mentioned, M&S saw full-price sell-through at 88%, level with the prior year and well above historical rates. Its Clothing & Footwear market share increased 30bps to 9.3% (Kantar).
As for those booming store sales, it saw strength in city centre and shopping centre locations, while the online growth took e-sales to £1.2 billion.
The growth in the division’s operating profits (when the benefit of the previous year’s business rates relief is factored out), was 9.6%. And the adjusted operating margin of 8.7% is now around 170bps above 2019/20.
The overall results “reflected the leverage from sales growth offsetting cost pressures”. It added that it has “a more confident approach to buying, and focus on the modern mainstream customer”. It’s “buying more deeply into core lines, and offering clearer price points and better availability”.
This has helped women’s denim sales grow, cementing its “leading market share in the category, which has increased to 13% from less than 10% two years ago”.
And greater investment has been made into “categories that drive style perception”. That helped casual dress sales grow 40% in 2022/23.
It saw strong event-related sales as weddings, holidays and other social occasions returned post-pandemic. That boosted top-end Autograph own-brand sales, although it also make “further progress” in casualwear.
Men’s Autograph sales increased 60%, while chino sales increased 25%, “reflecting the strategy to build a ‘smart separates’ business for workwear”.
And it said Kidswear and Home “offer important potential for improvement in market share”. But growth in the latest year was “modest”.
As for the firm’s well-publicised dive into third-party brand sales, it said it now trades with over 140 partners, “strengthening the customer offer where brands are important such as dresses, sports, home and beauty. Third-party brands help attract new shoppers, who also buy M&S products”.
Total sales of Clothing, Beauty and Home brands increased 67% to £158 million. Online brands sales now represent around 8% of total online sales.
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