British retailer Marks & Spencer has reported a better-than-expected 8.1% rise in sales over the Christmas trading period, driven by market-leading growth in food and a strong performance in womenswear.
The company said the strong performance underpinned its confidence about profit growth this year, but it sounded a note of caution on pressure from higher-than-anticipated wage and business rates inflation.
"We enter 2024 with a spring in our step, but clear eyed on the near-term challenges," chief executive Stuart Machin said.
Shares in M&S, which have doubled over the past year, fell 4.5% in early deals.
M&S said like-for-like food sales rose 9.9% in the 13 weeks to 30 December, ahead of the most optimistic analyst forecasts and a consensus of 6.6%, while clothing and home growth of 4.8% also soundly beat expectations of a 2.8% rise.
In food, M&S said it outperformed the rest of the grocery market, noting that its volume sales were up 7%, while clothing and home also grew ahead of the market.
A Strong Christmas
Investors have growing conviction that Machin's strategy to turn around the 140-year old group after years of false dawns is gathering momentum, with both its clothing and food businesses firing.
But the turnaround comes at a time when expectations for economic growth in Britain remain uncertain, and M&S noted both consumer and geopolitical risks in the year ahead.
However, M&S said it was confident its results for the year to end-March would be consistent with market expectations.
Analysts currently expect adjusted pretax profit for the year to come in at £663 million (€770.6 million), up from £482 million (€560.2 million) in 2022/23.
Russ Mould, investment director at AJ Bell said, “Marks & Spencer has enjoyed a good Christmas with another strong showing in food, and its clothing and home arm trucked along nicely during its third quarter. Dig deeper and you’ll see that both divisions saw a slowdown in the pace of growth versus its first-half period.”
“Consumers are still being cautious about their spending so much of the headwinds are out of Marks & Spencer’s control. But that hasn’t stopped the company from doing its best to keep the tills ringing,” he added.
Clive Black, head of consumer research at Shore Capital added, “A modernising M&S is reverting to the positive traits those of a certain age warmly remember. Grounded management speaks to confidence that FY24 will be consistent with market expectations.”
News by Reuters, additional reporting by ESM.