LONDON — Marks & Spencer’s efforts to tighten operations, curtail discounting and sell third-party clothing brands paid off in the fiscal third quarter, with group revenue rising 18.5 percent year-over-year to 3.27 billion pounds.
Compared with the corresponding period two years ago, revenues were up 8.6 percent.
The retailer’s once-embattled clothing and home division benefitted from fewer promotions, and a greater online offer. Revenue in the 13 weeks to Jan. 1, encompassing the holiday trading period, was 37.7 percent higher than the corresponding period last year, and 3.2 percent above 2019 levels.
Despite the uptick in growth, M&S shares were down 5.5 percent at 2.39 pounds in mid-morning trading on Thursday. They fell further during the day, closing down 7.9 percent at 2.33 pounds on the London Stock Exchange.
Steve Rowe, chief executive officer, said trading over the Christmas period was “strong,” and demonstrated the “continued improvements” the store has made to product and value.
“Clothing and home has delivered growth for the second successive quarter, supported by robust online and full-price sales growth, food has maintained its momentum, outperforming the market over both 12 and 24 months. The market continues to be impacted by the headwinds and tailwinds that we reported in the first half, but I remain encouraged that our transformation plan is now driving improved performance,” he said.
In November, during the first-half results announcement, Rowe had said Brexit, the pandemic and supply chain challenges would continue to impact the business in the next year.
He also said there would be “COVID-19 bounce back tailwinds,” and noted that M&S continued to make “important gains in market share and customer perception.”
In the clothing and home division, Rowe said full-price sales grew by 45 percent “as we maintained our trusted value trading stance.” The company said it reduced the amount of product sold on promotion by 66 percent, and stock into sale by 21 percent compared to fiscal 2019-20.
Online clothing and home sales continued to be strong, Rowe said, with growth of 50.8 percent supported by “substantial expansion” of in-store fulfillment. Store sales were down 10.8 percent on fiscal 2019-20, while sales at out-of-town retail parks were up and continuing to outperform stores in city centers.
Marks & Spencer has also been making an effort to expand its offer to third-party brands on its ever-expanding fashion and beauty platform online.
It sells brands including Jigsaw, Ghost, Nobody’s Child and Seasalt Cornwall. It also sells products by Jaeger, which it purchased out of administration a year ago. As reported, the store is said to be a potential buyer for Gieves & Hawkes, the Savile Row tailor owned by the Trinity Group of brands, which slid into administration earlier this month.
The retail giant said food sales increased 12.4 percent, with retail parks and the smaller, Simply Food stand-alone stores continuing to outperform. The retailer noted the business generated its highest ever Christmas sales, with December growth in line with the performance for the quarter.
During the period, the group said it further strengthened its balance sheet and liquidity position. M&S said it repaid a December 2021 bond maturity through cash, and signed a new 850 million pounds revolving credit facility that matures in June 2025. It also disposed of two warehouses for a total cash consideration of 42.5 million pounds.
The company said it is looking to its full-year results with confidence, and expects profit before tax and adjusting items of at least 500 million pounds, assuming there are no further material restrictions or lockdowns.
Julie Palmer, partner at the financial and business consultancy Begbies Traynor, noted that the clothing and home division was the “big winner” in the quarter, a sign that M&S is getting that segment of the business — which has long been plagued by supply-chain issues, overstocking, promotions and competition from fast-fashion retailers — under control.
She added: “What is clear is that the long-awaited turnaround of one of the country’s most famous names seems to be finally gaining traction.”