Marks & Spencer profit surges as clothing stores reopen post lockdown

Marks & Spencer Group Plc surged after raising its profit forecast on strong sales of both food and clothing in stores that reopened following months of lockdown at the beginning of the year. 
 

The household British retailer said it expects profit to be above the upper end of previous guidance of 300 million pounds to 350 million pounds ($409 million to $477 million). 

The shares rose nearly 10% to 156.8 pence in London on Friday morning.  

The bullish outlook comes after food revenue rose by nearly 11% in the 19 weeks to Aug. 14, compared with the corresponding period last year. The strong sales in food were also up nearly 10% on the same period in 2019 before the pandemic. 

Similarly, the retailer’s clothing and home division, which has long struggled, recorded revenue up 92.2% on last year, when shops were closed, and down just 2.6% on 2019 levels. International revenue is also up. 

In a promising sign for the retailer, it said that while some of the uplift in sales was a result of pent-up demand, overall it believes the improvement in performance is a result of its turnaround program. 

A household name in Britain, M&S has been trying to restructure and improve its performance for at least a decade. Profitability has been falling for years, hurt by changes in the competitive U.K. market. Various management teams have tried to turn the business around, with the current effort led by Chief Executive Officer Steve Rowe.

The raised guidance at M&S is a result of a “disciplined approach to its clothing assortment” that’s boosting margins with online sales rising as a portion of the total, Bloomberg Intelligence analyst Charles Allen said. 

“It’s an early first step for M&S after years of struggling to regain its historic connection to consumers, but the new online model could maintain its appeal,” he said.