M&S beats estimates for first half

Marks & Spencer Group plc reported first-half earnings that beat estimates and forecast an increase in profitability for the year as it offers fewer promotions.

Gross margins will be “towards the top end” of a range from unchanged to a 0.25 percentage point increase, the London-based company said yesterday as it reported a 5.8% drop in underlying pre-tax profit and said clothing sales declined at a more moderate pace in the second quarter.

The retailer is being less promotional than last year and has increased supplies of popular advertised lines such as military coats, chief executive Marc Bolland said.

After falling 6.8% in the first quarter, same-store sales at the general-merchandise division eased 1.8% in the second three months. UK gross margin widened 0.3 percentage point.

“General merchandise did show signs of a big pick-up, but autumn-winter remains pretty key,” John Stevenson, an analyst at Peel Hunt in London, said.

“They made some basic errors with ranges, so we can gain comfort” from the rebound in sales, he said&.

Underlying pre-tax profit rose to £296.8m (€369m) in the six months to Sept 29, beating the £280m median estimate of 13 analysts surveyed by Bloomberg.

The retailer ordered five times as much stock of advertised lines compared to last year, and sold three times more of those items in the first four weeks of the season, Mr Bolland said.

“We believe we’ve got good quality in stores and some excellent backing of trends out there,” such as baroque lace skirts, the CEO said.

Marks & Spencer said sales growth at its food division accelerated to 1.6% in the second quarter from 0.6% in the first three months, outperforming the market.

Recent business has been “volatile” and M&S said it is “cautious” about the outlook for the rest of the year. “People are a bit more wary now about payday,” Mr Bolland said.

The CEO is 18 months into a three-year turnaround plan focusing on turning Marks & Spencer into an international, multi-channel retailer. Concept shops with new beauty ranges, enhanced signage, and online browsing-and-order points have shown a 2.6% increase in sales, the company said.

Bloomberg