Marks & Spencer upgrades profits forecast after ‘strong’ sales

It comes amid a challenging backdrop for the retail sector, as higher mortgage costs and household bills have put pressure on shoppers’ budgets.

On Tuesday, the company recorded an 11 per cent sales rise in its food operation, while its clothing and home business saw sales grow by “over 6 per cent”.

The clothing and home arm reported particularly “strong” growth in its stores, with “subdued growth” online.

It added that it sold more products at full price, meaning less stock went into its latest sale than previously planned.

M&S said its half-year results for the six months to September, which are due to be released in November, are expected to be ahead of earlier forecasts.

In a statement, the retailer said: “There remain considerable uncertainties about the economic outlook, and there is a risk that the consumer market will tighten as the year progresses.

“Nevertheless, we now expect the outcome for the year to show profit growth on 2022-23, and the interim results to show a significant improvement against previous expectations.”

Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club, commented: "Following on the heels from Next’s recent profit upgrade, M&S has also announced that it expects profit for the year to be above expectations.

"This is evidence that the UK consumer is still spending, despite the gloomy economic headlines.

“The results are also testament to the group’s progress against its strategy, launched last year.

"This aims to improve brand perception and designs, reduce discounting, and improve the online offering, while taking a knife to costs and instilling a more entrepreneurial culture.

"Today’s trading update suggests this plan is resonating with consumers with M&S continuing to increase its market share in clothing and home.

“M&S cautions that there are still considerable uncertainties about the economic outlook. Nevertheless, there are more reasons for optimism now than there have been for some time."

AJ Bell investment director Russ Mould said: “There have been so many false dawns for Marks & Spencer over the years that it would be understandable if some observers remain sceptical, but its latest unscheduled update upgrading guidance is further evidence that something real is happening at the retailer.

“The food side of the business has generally performed well over several years but the big transformation is in clothing. Like a dowdy middle-aged dad who gets made over to a sharp new look – Marks & Spencer has really upped its game.

“The company has been steadily taking market share, helped by the failure and even collapse of some rivals over recent years.

“It may also be being supported by the fact its traditional demographic is likely doing rather better out of rising interest rates thanks to owning their homes outright and potentially having meaningful cash savings."