By Laura McGuire
Marks & Spencer (M&S) has once again found itself back in fashion with investors and shoppers, posting a near £100m in rise in profits in its half year results.
Shares in the company rocketed over 10 per cent this morning after the century-old business said its turnaround plan which intends to make the brand look trendy and accessible is continuing to wow customers.
The high street stalwart’s resurrection has been nothing short of a miracle, just three years ago it wasdrowning in a sea of losses due to the pressures of the Covid-19 pandemic and customers falling out of favour with its frumpy fashion designs.
Today, it’s hard to imagine that was ever the case for the retailer, its clothing line is trading stronger than some purely fashion brands rising 12.1 per cent in its half year.
This can be partly credited to a range of its garments and accessories going viral on Tik Tok and Instagram. Its £35 handbag which mimicked a £2,000 Celine crossbody bag has sold out regularly.
M&S said it had “historically” suffered from a high cost and under-invested supply chain with the group now cutting the number of suppliers it uses to get rid of trapped stock and speed things up.
Sparks has also appeared to have no trouble enticing customers back to physical stores, as it continues its roll out of more than 100 flashy food sites and revamped full range stores.
November will be the firm’s biggest ever store opening month, with plans to launch nine new sites, including one in the former Debenhams site in Birmingham.
The firm said: “Our objective is to accelerate store rotation to create a brand-enhancing, productive estate of circa 180 full line stores and 400 M&S-operated food stores in growth locations by 2028.”
Plans to modernise its store portfolio comes as arefit of the firm’s Oxford Street flagship was nixed by Michael Gove in a high profile battle earlier this year.
M&S said it has been “constrained” by its historic failure to modernise a legacy store base. It added: “As a result, even today, we depend on ageing stores that are costly to operate and maintain and, in some cases, no longer on pitch.”
While M&S continues to sparkle brightly, its online supermarket venture with Ocado is lagging behind.
During the term, retail sales increased 6.9 per cent, however the arm posted an adjusted loss of £23.4m up from £0.7m last year.
M&S said that delivery service, which has struggled in recent years, is also in the early stages of a reset programme, which will include increased price cuts and stocking more M&S products online.
Three years ago, M&S paid £575m as a first down payment for 50 per cent of Ocado retail, if the group’s performance had been more buoyant M&S would have paid another £190m this month.
Clive Black, director at Shore Capital told City A.M: “It hasn’t gone to plan so M&S has written down the carrying value of that potential second payment [to zero].
“In all probability, M&S won’t be making that second payment to Ocado Group.”
Black said he believes that M&S is not happy with Ocado’s losses but thinks the company remains committed to the group.
He added:”[Machin] mentioned that there is probably gonna be a couple of years of poor profit performance from this business, but they absolutely are committed to it and they do want to try and turn it around and start making a contribution again.”
