Interactive Investor

ii view: M&S sales impress but no profit upgrade

12th January 2023 15:33

Keith Bowman from interactive investor

They're up 15% in 2023 so far, but shares in this iconic clothing and food retailer have been hit hard over the last year. Buy, sell, or hold?

Festive trading update for 13 weeks to 31 December

  • Same store or like-for-like clothing & home sales up 8.6%
  • Like-for-like food sales up 6.3%
  • Total UK sales up 9.7%
  • Total international sales up 12.5%

Chief executive Stuart Machin said:

“M&S sustained trading momentum through the peak quarter and both Food and Clothing & Home have delivered strong growth.

“Given the inflationary pressures impacting our customers and our business, M&S is taking action to structurally reduce costs and reinforce our customer proposition. Our singular focus is on delivering the M&S Reshaped programme to drive growth and value creation as the UK's leading omnichannel retailer. This performance across both our businesses provides confidence in delivering our full year results."

ii round-up:

Retailer Marks & Spencer (LSE:MKS) today detailed sales for the critical festive period which beat City forecasts but disappointingly reiterated its existing full-year profit expectations.

UK same store clothing and home sales for the 13 weeks to the end of December rose 8.6% to £1.18 billion, exceeding analyst forecasts for nearer 5%. Food sales on the same basis gained 6.3% to £2.1 billion, ahead of forecasts of 3%. Unchanged full-year profit expectations were accompanied by management outlook comments referencing clear macro-economic headwinds and underlying cost pressures. 

The FTSE 250 retailer's shares fell by around 1% in afternoon UK trading having gained by around a fifth over the last month but fallen by 38% over the last year. Next (LSE:NXT) is down by just under a fifth over the last year, while the FTSE 250 index has fallen by around 14%. 

Although not reported in the numbers, M&S volumes through its partnership with delivery company Ocado Group (LSE:OCDO) accounted for around 30% of the average basket on over the Christmas peak.

Total sales overseas gained by 12.5% to £312 million, while online clothing and home sales grew by 0.7% to £364 million. 

The group’s balance sheet was strengthened during the period with its £850 million revolving credit facility extended by one year to June 2026.

Full-year numbers to the start of April are scheduled for 24 May.  

ii view:

Marks & Spencer operates around 900 stores across the UK including over 600 Simply Food stores. It also has more than 400 outlets overseas, most of which are franchised. Along with its 50% joint venture with food delivery company Ocado, it also operates both M&S Bank and M&S Energy. 

A transformation programme focused on store renewal and restructuring initiatives, investments in technology, growing its online food proposition in partnership with Ocado and focusing down on costs remains ongoing. 

For investors, the tough consumer backdrop including a cost-of-living crisis and rising interest rates must be kept in mind. Rising costs for businesses generally warrant consideration, as does required ongoing investment expenditure to upgrade its stores and technology, while the dividend remains halted in the wake of the pandemic. 

On the upside, sales beats for both its clothing and home and food businesses suggest that its transformation programme is at least attracting the attention of consumers. Adjustments including store closures continue to be pursued, net debt fell as of its previous first half results as it paid no dividend, while an estimated price-to-net asset value ratio of around one contrasts with ratios of over five times at rival retailers B&M European Value Retail SA (LSE:BME) and Next, suggesting the shares are not obviously expensive. 

In all, and weighing outlook uncertainty against continued group change, long-term fans of the company are likely to remain patient.  


  • Transformation programme
  • Ocado Joint Venture gives it a scalable presence in online grocery


  • Competition not standing still
  • No dividend payment

The average rating of stock market analysts:


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