M&S shares close at record high
Shares in Marks & Spencer closed at a record high tonight after booming sales raised the prospect of a return to its halcyon days of billion pound profits.
The stock lifted 6% to 698p after M&S posted its best half-year results in almost a decade and reported strong sales growth ahead of the all-important build up to Christmas.
The sparkling performance came after M&S encouraged an additional 19 million visits to its stores in the first half of the year with a new look, better products, and the highly successful “Your M&S” advertising campaign.
David Buik, of Cantor Index, hailed M&S chief executive Stuart Rose as “the undisputed king of gowns and blouses” as M&S bucked the downward trend of its rivals.
And retail analyst Nick Bubb, of Evolution Securities, upgraded his full-year profits forecast from £915 million to £985 million.
“The £1 billion being talked about by some people is not impossible,” he added.
But Mr Rose refused to talk of a recovery, instead referring to “the ‘R’ word”.
“In retail, you never get to where you want to go, the journey never ends,” he said. “In terms of the short-term, ask me after Christmas. If we have a good Christmas then we can say we are in the next stage of the journey.”
M&S made profits of more than £1 billion in 1997 and 1998 but the figure dived to as low as £145.5 million in 2001 as customers were put off by dreary clothes and depressing stores.
Mr Rose has been credited with transforming its fortunes and the high street giant today delivered a 32.2% rise in pre-tax profits to £405.1 million for the six months to September 30.
Much of the recent success has been put down to the award-winning adverts, which feature 1960s fashion icon Twiggy and friends for womenswear and the voice-over “this is not just food, this is M&S food” for food.
They have cost M&S an estimated £62 million in the last year but Mr Rose today said the nvestment was paying off with items such as a £35 jersey-dress worn by Lizzie Jagger in the adverts proving hugely popular.
“It flew out the stores,” said Mr Rose. “In fact, it flew out so quickly we didn’t even see it.”
He said that while the advertising campaign may have attracted more customers into its stores, “the more important news is that it is converting into more sales” as clothing ranges, particularly womenswear, proved popular.
Same-store sales were up 7.3% in the first half – with general merchandise up 9.2% and food up 5.3% – and have maintained that level in the last five weeks.
“If we continue at that level I shall be pretty pleased,” said Mr Rose. “We believe we are well positioned for the all-important Christmas period.”
The first-half profits figure was the highest since the £452 million the company banked in 1997. It came as total sales lifted 11% to £3.93 billion and Mr Rose announced a 31% rise in the interim dividend to 6.3p a share.
He added: “We had a good first half. We have delivered better product, better service and better store environment. We gained in market share in all areas in which we trade.”
M&S now holds 10.1% of the clothing market, reinforcing its position as the largest clothing retailer in the UK.
And Mr Rose said he wanted to increase market share in food from the current level of 4% to 5% in the next five years.
“We are going to be quite aggressive about this,” he said.
Shares in M&S have more than doubled in little over a year and are now well above the 400p a share Sir Philip Green was willing to offer in a proposed takeover in 2004.
But Mr Rose, who was parachuted into the hot seat in 2004 to fend off Sir Philip’s £9 billion bid, today said there was still much to do.
He said the store refurbishment programme was only a third of the way through and a further £800 million will be ploughed into modernising the estate in the coming year.
M&S also announced the first significant shake-up of its store portfolio for almost a decade, with the company aiming to increase selling space by 15% to 20% in the next five years.
And it said it will roll out its Simply Food offer at BP petrol stations to 200 forecourts.
M&S, which currently has 507 stores in the UK, said the new space will help it “stretch the brand” as it moves into new products and services.
The chain now sells electrical goods such as televisions, DVD players, hi-fis an laptops at 13 of its stores. It is also trying out hot food counters and a restaurant recently opened in Newcastle.
Richard Hunter, head of UK equities at Hargreaves Lansdown stockbrokers, said: “There are a slew of positives coming out of today’s very robust numbers - continuing strength in clothes and food, the refurbishment programme advancing, the ongoing success of the TV advertising campaign and even the roll-out of its Simply Food brand across BP forecourts.”
He added: “There is the key Christmas trading period to come which should finally underline that the recovery is complete.”
