It’s not just growth, it’s M&S growth: Supermarket reports ‘encouraging’ festive results
Luxury supermarket M&S sustained a strong performance through the Christmas period, making it the fastest growing major store-based food retailer in the festive run up.
Food sales continued to outperform, increasing 12.4 per cent, with sales excluding hospitality and franchise up 16.4 per cent.
M&s generated its highest ever Christmas sales with December growth in line with the performance for the quarter.
Although not included in its figures, M&S products performed strongly on Ocado.com, representing around 30 per cent of baskets in December.
It’s not all just food; M&S clothing and home sales were also up by 3.2 per cent.
Full price sales grew by 45 per cent, reducing the amount of product sold on promotion by 66 per cent and stock into sale by 21 per cent compared to 2019/20.
Online sales continued to be strong, with growth of 50.8 per cent supported by substantial expansion of in-store fulfilment.
However, store sales were down 10.8 per cent on 2019/20 with retail parks up, continuing to outperform stores in city centres.
International sales increased 5.1 per cent, with online sales more than doubling.
Performance was driven by clothing and home growth in the Republic of Ireland and key markets such as India after Covid related restrictions were eased.
In addition, it generated strong growth through online marketplaces and in franchise shipments to the Middle East.
During the 13 weeks to January 1, the M&S group further strengthened its balance sheet and liquidity position.
It repaid the December 2021 bond maturity through cash and signed a new £850m Revolving Credit Facility maturing in June 2025.
In addition, it disposed of two warehouses, providing a £42.5m boost.
The statement said it was “more confident” in the store’s ability to deliver the strong trading indicated in November.
It now expects a full year profit before tax and adjusting items of at least £500m, assuming no material restrictions or lockdowns take place.
Full year results for the 52 weeks ended 2 April 2022 will be reported on 25 May 2022.
Steve Rowe, Chief Executive said: “Trading over the Christmas period has been strong, demonstrating the continued improvements we’ve made to product and value. Clothing & Home has delivered growth for the second successive quarter, supported by robust online and full price sales growth. Food has maintained its momentum, outperforming the market over both 12 and 24 months.
“The market continues to be impacted by the headwinds and tailwinds that we reported in the first half, but I remain encouraged that our transformation plan is now driving improved performance.”
Laura Hoy, Equity Analyst at Hargreaves Lansdown: “Marks & Spencer’s strong top-line growth is a product of its strategy shift with less discounting in Clothing & Home and an improvement in online sales. Food has become a much larger slice of the pie, so the fact that it delivered double-digit growth was encouraging.
“But any excitement over M&S’s strong third quarter sales is somewhat tempered by management’s minimal profit guidance increase. There’s a chance that this kind of sales growth won’t be sustained in the coming year—particularly if inflation makes consumers wary. We think M&S is well-placed at the higher end of the spectrum, but it’s not immune.”
“MKS stock has climbed markedly higher since the start of the pandemic, and it will take a lot more than a nudge to profits to sustain those expectations.”
Shares are down over five per cent this morning on the London Stock Exchange.