Irish shop reopenings boost M&S sales

Marks and Spencer have seen a big bounce in sales in the Republic of Ireland following the lifting of lockdown restrictions.

Marks and Spencer is looking to double its international online sales over the next three years having seen strong growth in the first half of its financial year driven by sales in Ireland and India.

The UK department store giant said its international business was boosted by a “strong rebound” of activity in its shops in the Republic upon reopening from lockdown restrictions. That said, M&S said it has seen food supply chain issues relating to its Irish shops and incurred around £13m (€15m) in operating costs relating to Ireland due to EU border issues following Brexit.

M&S shares rocketed by as much as 21% after the group raised annual profit forecasts for a second time this year and said its long-targeted turnaround is underway.

The retailer posted revenues of £5.1bn for the six months to the start of October, up from £4.1bn 12 months ago and £4.8bn in 2019.

It bounced back to first-half profit, showing a surplus of £187.3m next to an £87.6m loss 12 months ago. The latest profit was also up on the £158.8m made in the first half of the 2019/2020 financial year.

But, more importantly for investors, M&S said it expects its full-year profit — for the 12 months to next April — to be about £500m.

That would be significantly higher than the £350m target the company outlined back in August.

The better outlook is based on strong food sales and a recovery in the clothing and online businesses.

M&S' clothing and home department delivered a substantial improvement in profitability with sales down just 1% compared with 2019/20 despite lockdown extending into week one of the period. Sales grew in the second quarter and overall full-price sales were up 17.3% for the period. Operating profit before adjusting items was £156.2m compared to £109.6m in 2019/20.

The MS2 online brand delivered strong growth, with sales up 60.8% versus 2019/20 and 19.7% compared with last year.

M&S has been trying to revamp its business for at least the past decade, with successive management teams repeatedly failing to return to a time when the chain generated profit topping £1bn.

"Given the history of M&S we've been clear that we won't overclaim our progress," said chief executive Steve Rowe. 

"Unpacking the numbers isn't a linear exercise and we've called out the Covid bounce back tailwinds, as well as the headwinds from the pandemic, supply chain, and Brexit, some of which will continue into next year. It is clear that underlying performance is improving. The hard yards of driving long-term change are beginning to be borne out in our performance," he said.

• additional reporting Bloomberg