UK retailer Marks & Spencer has forecast "further progress" in the rest of its financial year after reporting a better-than-expected 17.2% rise in first-half profit, helped by market share gains, adding to evidence its latest turnaround plan is working.
After over a decade of failed revival efforts, M&S under CEO Stuart Machin is reaping the rewards of a costly programme to improve the value and quality of its food and clothing, overhaul its store estate, upgrade its technology and e-commerce operations and modernise its supply chain.
Shares in M&S were up over 3% in early trading today, taking gains over the last year to 76%.
The group said it made profit before tax and adjusting items of £407.8m in the six months to September 28 - ahead of analysts' consensus forecast of £361m and the £348.1m made in the same period last year.
Revenue rose 5.7% to £6.48 billion, with food sales up 8.1% and clothing and homeware sales up 4.7%.
"In the first five weeks of the second half overall trading remains on track and we are confident of making further progress in the remainder of the year," M&S said.
Last week clothing rival Next raised its profit outlook after better-than-expected recent trading, while Primark said this week that it was expecting good Christmas trading.
M&S did, however, caution that in the first half its cost inflation ran well ahead of overall inflation and the consumer environment was uncertain. It expects that backdrop to persist in the second half.
"Despite our strong trading momentum, there is much more opportunity for future growth and that energises us," said Machin.
Before today's update, analysts were on average forecasting full year profit before tax and adjusting items of £780m, up from £716.4m in 2023/24.
Marks & Spencer faces £120m of extra costs next year as a result of the UK government's budget on October 30, the food and clothing retailer's chief executive said today.
An increase to employers' social security contributions amounts to a £60m headwind to M&S next year, while the 6.7% rise in minimum wage announced by the government will add another £60m, CEO Stuart Machin said.
The group had already planned for the wage increase and Machin said it would try to absorb the extra costs by looking for savings elsewhere in the business rather than pass them on to consumers.
He called the minimum wage "a good cost" and said he understood finance minister Rachel Reeves had difficult choices to make, but he was disappointed that there was no immediate cut to business rates for retailers.
"Although there was some recognition that retail and hospitality should pay less, I was disappointed that it's unclear what that will be," he told reporters.
Reeves committed to lower business rates for high street stores from 2026-2027.
Predominantly bricks-and-mortar retailers have for years complained that business rates - a property tax charged on most commercial properties to fund local services - are archaic and hand an unfair cost advantage to online retailers.
