M&S’s half year report on Wednesday showed more of the same in terms of the retail giant’s ongoing recovery. The period to late September saw surging pre-tax profit with a continuing increase in fashion sales, although the smaller non-UK business struggled.

Looking at the figures first, statutory revenue rose 5.7% to reach £6.481 billion while sales were up 5.8% at £6.524 billion. Operating profit before £15.9 million in adjusting items rose 12.7% to £462.7 million and profit before tax and adjusting items rose 17.2% to £407.8 million. 

Profit before tax was up 20.4% at just under £392 million and profit after tax increased 34.7% to £278.6 million.

CEO Stuart Machin was understandably upbeat. He said: “Executing our strategy to ‘Reshape M&S for Growth’ has again delivered an increase in customers, sales value and volume, market share, profit and returns.

“In Clothing, deeper buying into campaign lines and on-trend collaborations have driven yet another move on in style perception, with Womenswear and Menswear attracting new customers. Our authoritative lead on quality and value has supported strong full-price sales in a promotional market.”

But he also refused to be complacent, saying: “In the spirit of being positively dissatisfied, we have so much to do over this year and beyond.

“With Clothing in growth and strong online performance, now is the time to seize the opportunity in other categories including Home and Beauty. Across Clothing & Home online, we need to accelerate our transformation and reimagine our proposition. Under new leadership, we’ve now got a grip on our digital and technology infrastructure, as progress to date has been slower than we would have liked, so we must accelerate delivery. 

“We are resetting priorities in International to drive future growth, as well as acting now to improve short-term performance. 

“We have fresh impetus in our store rotation plan with the acquisition of 10 major new sites in high quality, high growth locations, but we want to go faster.

“The business remains in robust financial health. We have improved our return on capital employed to 15% and further strengthened our balance sheet, giving us the capacity and flexibility to invest for growth.”

Fashion strength

Looking more closely at the Clothing & Home performance in the UK and Republic of Ireland, sales increased 4.7% to £2.026 billion, with like-for-like (LFL) sales up 5.3%. Sales growth improved in Q2 (8.1%) compared with Q1 (1.3%), with more seasonable weather. Pre-adjusting item operating profit rose 0.5% to £242.2 million.

Market share was up 90bps to 10.3% for the 12 weeks to 15 September and despite a more promotional market, the full-price sales mix was broadly level at 80.5%. 

The adjusted operating profit margin was above target at 12% compared with 12.4% last year, down slightly due to “investments in technology and digital development, partly offset by cost savings”.

The company said Women’s, Men’s and Lingerie saw good growth in categories such as knitwear, casual tops and men’s Autograph lines and collaborations with Sienna Miller and Bella Freud sold rapidly.

In a softer Kidswear market, it slightly grew share, with growth in boys’ daywear.

Online participation increased to 33% (up from 31% a year ago). Online sales were up 11.3%, with growth increasing to 16.5% in Q2 as it introduced an “upgraded fashion-led online experience, as marketing was weighted towards brand and social channels”.

Partner brand sales continued to perform well, up c.40% with growth in dresses and footwear.

It also said that new Full Line stores are trading strongly ahead of plan, generating healthy paybacks. Overall store sales increased 1.7%. Two new Full Line stores at Dundee and Washington Galleries opened in the period with their Clothing & Home sales outperforming appraised levels by 13%.

But despite the improved performance of Clothing & Home, availability and sales “remain constrained by a high cost, slow moving supply chain”. Changes are under way on this front.

International disappointment

The retailer also said International sales dropped 11.6% to £321 million and pre-adjustment operating profit fell 53.1% to £15.2 million. It talk of a “reset under way” under a new leadership team.

The ambition for International is to build a “global omnichannel business. The recent improvement in performance of the UK business, and the strength of the M&S brand and its partners provides a significant opportunity for growth, although results in the period were disappointing”.

Sales declined 10.3% at constant currency, continuing the weak performance reported in H2 last year. Owned sales were down 13.2% driven by India. Franchise sales were down 7.8% with a softer C&H order book.

The disappointing partnership sales “reflect weak underlying demand and the need to improve value and style perceptions in local markets and we are testing new partnership models to enable this”.

In addition, several wholesale and marketplace sales opportunities have been identified, which should contribute to the second half result.

The company concluded: “With reset actions under way we are confident International remains a growth opportunity in the medium term” and it expects the business to stabilise in the next year.”