Marks & Spencer PLC books record food sales over Christmas

Marks and Spencer Group PLC (LSE:MKS) shares took a bashing e3ven after it reported ‘strong’ growth over Christmas as food sales hit a record and clothing grew for a second successive quarter.

As a result, underlying profits this fiscal year will be at least £500mln, confirming guidance issued in November, the retailer added.

“Trading over the Christmas period has been strong, demonstrating the continued improvements we’ve made to product and value,” Steve Rowe, chief executive, said.

Sales rose18.5% to £3.27bn in the 13 weeks to 1 January 2022 compared to a year ago and by 8.9% over the period before the pandemic.

Food revenues rose by 12.4%, with an even stronger improvement stripping out hospitality and franchise sales.

Rowe said retail parks and Simply Food stores were highlights while the larger basket sizes seen in the first half continued through the Christmas period as customers used M&S for more of their everyday shopping.

“As a result, M&S was the fastest-growing major store-based food retailer in the period,” he said. 

Clothing & Home sales were up 3.2% with online sales up 51% and full-price sales 45% ahead.

The amount of stock put on sale or promotion was down 66% and 21% compared to 2019/20, Rowe said.

House broker Shore Capital upgraded its profit forecast by 5% on the back of the update, saying that M&S had sustained its pretty broad-based positive trading momentum hence an increase to £515mln from £490m (including business rate relief).

Excluding business rate relief the FY22 forecast rises from £430m to £455mln.

“With respect to FY23, we are alive to the fact that times remain fragile, uncertain and volatile. Hence, we keep our FY23 PTP expectation at £450m (EPS, 19.3p).

“As to that FY23 trading environment, we are alive to the challenges to UK household expenditure from rising everyday essential prices, including energy, food, and motor fuel, plus the proposed increase in National Insurance Contributions to fund health and social care and the prospect to rising base rates.”

Shares fell 6.5% to 237.4p, which market watchers attributed to disappointment with the profits outlook and also that the shares had risen almost 80% over the past twelve months.