Marks & Spencer profits have increased by more than a fifth, beating City expectations, with the retailer crediting the rise to improvements to the style credentials of its clothing and more affordable food.
However, the company warned it faced a challenging year ahead as costs continued to increase. It expects to spend £100m more on staff wages and £50m on energy.
It said those rises would be offset by measures such as more automated tills and the closure of about 20 stores, as already announced, about half of which will be relocated, including new flagship stores in Liverpool, Leeds, Manchester, Birmingham and Thurrock.
M&S said it would restart dividend payments to shareholders after pre-tax profits rose by 21.4% to £475.7m in the year to 1 April, with sales increasing 9.6% to £11.9bn.
Clothing and homewares sales soared by 11.5% to £3.72bn, including a 4.8% rise in online sales despite a wider market retreat in orders for home delivery. Food sales rose 8.7% to £7.22bn, led by a 40% jump in the group’s Remarksable budget range.
The group’s Ocado Retail joint-venture, which sells groceries online, was a fly in the ointment, however. M&S made a loss of £29.5m from its share in the business, down from a profit of £13.9m a year before, as sales fell 1.2% to £2.22bn.
Stuart Machin, the chief executive of M&S, said it had been “a strong year despite the headwinds” and that profits had risen even though the retailer had not passed on the “full force of cost increases” to customers on either food or clothing.
“One year in, our strategy to reshape M&S for growth has driven sustained trading momentum, with both businesses continuing to grow sales and market share,” he said.
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“Our food and clothing and home businesses invested in value to protect customers from the full force of inflation, which, while impacting margin, was the right thing to do, as serving our customers well is the only route to delivering for our shareholders.”
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