Marks & Spencer said its latest turnaround strategy was starting to deliver, enabling it to restore its dividend and forecast 'modest' revenue growth and a profit outcome ahead of market expectations this year, sending its shares 13% higher.
That rise extended the 139-year old British clothing and food retailer's gains this year to 50%, as hopes were raised that one of Britain's most elusive turnarounds could finally materialise after two decades of false dawns.
But while the shares were trading around 184 pence, they remain well off the 257 pence they were changing hands for in January 2022 and less than half the 400 pence Philip Green offered back in 2004.
Under CEO Stuart Machin, M&S is seeking to build a more resilient business with a focus on the quality and value of its clothing and food, heavy investment in technology and e-commerce, and a radical overhaul of its store estate.
It reported a better-than-expected 7.8% fall in 2022/23 profit and said it had made a good start to its new financial year, with both divisions growing sales.
"While the economic outlook for consumer spending is uncertain, cost inflation remains high, and market conditions are expected to become more challenging, the strategy is beginning to deliver improved performance and there remains much within the group's control," M&S said.
Interim finance chief Jeremy Townsend told reporters he expected 2023/24 profit to be £5 to £10 million below the 2022/23 outcome.
For the year to 1 April, M&S made a profit before tax and adjusting items of £482 million ($608 million), while prior to Wednesday's update analysts were on average forecasting about £400 million for 2023/24.
Shore Capital, the retailer's joint house broker, upgraded its forecast for 2023/24 by 14% to £475 million.
Cost headwinds in 2023/24 included over £50 million of additional energy costs and more than £100 million of extra labour costs, but M&S said these would be offset by cost savings of £150 million.
M&S has not paid a dividend since 2019/20 as it protected its balance sheet during the pandemic.
'Modest' Annual Payment
It plans to restore a "modest" annual payment, starting with an interim dividend in November.
"M&S has taken some important self-help measures in recent years and, with a strengthened balance sheet and a new set of priorities, it is in a stronger position than it has been for some time," Zoe Gillespie, investment manager at RBC Brewin Dolphin said.
Profit fell in 2022/23 despite a 9.6% rise in revenue to 11.9 billion pounds, due to higher energy and staff costs and unhelpful currency moves. It was also dented by M&S's exit from Russia, the lack of the prior year's government support on business rates and losses from its online grocery joint venture with Ocado .
However, food sales increased 8.7%, while clothing and home sales were up 11.5%, with M&S's bias towards older, more affluent customers giving it protection from the cost-of-living crisis.