Marks & Spencer Profits Jump as Food Delivers Market-Leading Volume Growth

Marks & Spencer Group (LON: MKS) reported a substantial increase in profits for the fiscal year ending March 30, 2024, driven by significant growth in its food segment. 

The company said its profit before tax and adjusting items was £716.4 million, a 58% rise from the previous year's £453.3 million. The statutory profit before tax also saw a notable increase, reaching £672.5 million, up from £475.7 million the previous year. 

This strong performance was underpinned by a 13% rise in food sales, resulting in an adjusted operating profit of £395.3 million, a significant improvement from last year's £248 million.

The company stated that food delivered “market-leading volume growth and strong innovation whilst broadening customer appeal.”

Clothing and Home also contributed to the positive results, with sales up by 5.3% and an adjusted operating profit of £402.8 million, compared to £323.8 million the previous year. This segment's margin improved to 10.3%.

Chief Executive Stuart Machin highlighted the company's strategic progress, noting that both the food and clothing sectors have achieved 12 consecutive quarters of sales growth. 

M&S noted its strategic investments, including the acquisition of Gist, have begun to pay off, enhancing the supply chain and supporting margin growth. The company has also committed to a structural cost savings target of £500 million over five years, up from the previous target of £400 million.

With increased free cash flow and a net funds position at year-end, M&S is poised to accelerate investment and has announced a full-year dividend of 3 pence per share.

Following the results, analysts at Shore Capital said in a note that Marks & Spencer (a house stock) “has again materially beaten market expectations by reporting an outstanding year of EPS growth (+c42%).” 

“CEO Stuart Machin speaks to being at the beginnings of a new M&S', one where we sense growth ambitions remain so guiding capital allocation for the medium-term around investment over, say, buybacks & lowering dividend cover,” said the firm. “With the delivery of sequential earnings growth, set on a very strong balance sheet (non-lease cash of c£46m), we foresee scope for material rating expansion (FY26F EV/EBITDA is 4.8x).”