Marks & Spencer on Wednesday beat forecasts for first-half profit and raised its full-year outlook but cautioned that the reintroduction of dividends was unlikely this year as cost pressures steepen.
The second profit upgrade in three months is the strongest sign yet that a turnaround effort led by chairman Archie Norman and CEO Steve Rowe is starting to bear fruit. Shares in the British retail brand soared 16.2% in early trade.
The restructuring at the 137-year-old clothing and food group is focused on rejuvenating an outdated store culture, investments in technology and e-commerce and an overhaul of its real estate but it is happening in conjunction with shortages of products and workers as the economy reopens from pandemic restrictions.
M&S made profit before tax and adjusting items of £269.4 million ($363.4 million) in the six months to Oct. 2 versus analyst forecasts of £205-264 million.
It made a loss before tax and adjusting items of £17.4 million in the same period last year.
The group raised its forecast for full-year profit before tax and adjusting items to about £500 million from previous guidance of over £350 million.
However, it cautioned that well publicised cost pressures will become progressively steeper and it said the reintroduction of dividend payments in the current year remained unlikely.
"It is clear that underlying performance is improving, with our main businesses making important gains in market share and customer perception," said Rowe.
"The hard yards of driving long term change are beginning to be borne out in our performance."
British retailers are grappling with delays in their international supply chains that are compounded by labour shortages in the UK transport and warehousing networks.
M&S said trading for the first four weeks of the second half has been consistent with growth rates reported in the second quarter and ahead of management expectations.
It said it expected the strong demand to be sustained in the near term.
The first-half performance was ahead of the profit of £176.3 million made in 2019, before the COVID-19 pandemic impacted trading.
Food sales increased 10.4% on 2019, while clothing and home revenue was down 1%, with full price sales up 17.3%.
M&S cut its net debt to £3.15 billion.