© Reuters.
UK retailer Marks and Spencer (LON:) (M&S) reported a pre-tax profit of £326 million for the first half of its fiscal year, marking a considerable increase from £208 million in the same period last year. This profit boost was primarily driven by a substantial rise in food sales, which climbed nearly 15%.
On Tuesday, M&S declared an interim dividend of 1p per share, its first since the onset of the COVID-19 pandemic. This announcement triggered a 9% surge in its shares to 245.5p during early trading hours in London.
The company’s turnaround strategy has yielded positive results, with its shares soaring over 90% since January. This impressive performance led to M&S’s return to the , positioning it as the index’s second-best performer.
For the half-year ending September 30, 2023, M&S reported an adjusted operating profit of £223.4 million, up from £171.4 million the previous year. However, its share of adjusted loss in Ocado (LON:) Retail spiked to £23.4 million.
CEO Stuart Machin attributed this growth to their strategic focus on providing trusted value and quality products. The company has implemented over 500 upgrades and invested £30 million in price reductions, leading to both businesses outperforming the market.
Additionally, M&S opened three full-line stores and refurbished six others as part of a store rotation initiative. A cost reduction program that saved £100 million and efforts towards modernizing its supply chain also played key roles in driving growth.
Despite these successes, M&S expressed concerns about future market conditions due to potential impacts on consumers from factors such as the highest interest rates in two decades and unpredictable weather patterns. These sentiments were echoed by Roula Khalaf, Editor of FT, and Clive Black at Shore Capital who upgraded his profit forecasts focusing on profit before tax and adjusting items.
InvestingPro Insights
InvestingPro’s real-time data and tips offer valuable insights into the financial health of M&S. According to InvestingPro, M&S’s P/E Ratio (Adjusted) as of Q3 2023 is a low 5.37, indicating that the shares are trading at a low earnings multiple. Furthermore, the company’s Price / Book ratio stands at 1.34, suggesting that the market values the company at a level close to its book value.
InvestingPro Tips highlight that M&S has high earnings quality, with free cash flow exceeding net income and consistently increasing earnings per share. This is reflective of the company’s strong performance and growth strategy. The company’s valuation also implies a strong free cash flow yield, further reinforcing its financial strength.
However, it’s important to note that the company’s revenue growth has been slowing down recently, and its stock price movements are quite volatile. This suggests potential risks and uncertainties in the future.
InvestingPro offers an additional 10 tips related to M&S’s financial performance and stock trends, providing a comprehensive view of the company’s financial health and market performance. For more detailed insights, consider exploring InvestingPro’s full range of tips and real-time data.
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