Marks & Spencer (M&S) exceeded expectations with a 58% increase in annual profit and announced its first yearly dividend since 2019, indicating a potential revival after two decades of struggles.
Shares in the 140-year-old retailer, one of the UK’s most prominent businesses, surged up to 10% to a six-year high of 300 pence.
The company declared it was in its strongest financial position since 1997 and projected further improvements.
Under CEO Stuart Machin, M&S is benefiting from significant investments to enhance the quality and value of its clothing and food, upgrade its technology and e-commerce operations, modernize its supply chain, and revamp its store network.
These efforts appear to be paying off after years of unsuccessful turnaround attempts.
“What is so exciting is that it feels like this turnaround strategy still has some way to go and yet this is not yet being reflected in the share price as many investors remain sceptical of the Marks recovery story,” said Ian Lance, fund manager at Redwheel, one of M&S’s largest investors.
M&S reported a profit before tax and adjusting items of £716.4 million ($913 million) for the year ending March 30, surpassing analysts’ expectations of £665 million to £705 million and the £453.3 million achieved in 2022/23.
Sales increased by 9.4% to £13.1 billion, with food sales up 13.0% and clothing and homewares up 5.3%.
The retailer aims to boost its market share in both the clothing and home and upmarket food sectors by 1 percentage point over the five years to 2027/28.
It targets adjusted operating margins of over 10% in clothing and home and over 4% in food.
Impressively, M&S already met these margin targets in 2023/24, achieving 10.3% in clothing and home and 4.8% in food.
Its market share grew by 40 basis points in clothing to 10% and by 15 basis points in food to 3.55%.
Recent industry data shows M&S as Britain’s second fastest-growing store-based grocer after Lidl.
“Given our track record of delivering volume growth, market share, and free cash flow, we are confident that we will make further progress in 2024/25 and beyond,” M&S stated.