Marks and Spencer shares dip despite strong Christmas

Marks & Spencer unveiled buoyant sales in its Christmas trading update on Thursday. The clothing and food retailer saw total UK revenues grow by 9.7% to £3.3 billion or by 7.2% on a like-for-like basis in the 13 weeks to 31 December 2023. UK food sales rose by 10.2%, excluding Ocado sales which are reported separately, and by 6.3% to £2.1 billion on a like-for-like basis, while international sales increased by 12.5% to £312 million.

M&S enjoyed record Christmas food sales on 23 December of £80 million, while its premium M&S Collection also grew sales by over 20% and saw it strong growth in sales of its budget range. However, on the day the shares dipped by 2.5% in initial trading.

M&S clothing expands market share

The company is growing market share in clothing after years of difficulties in the category and poorly performing ranges. Clothing and home sales increased by 8.8% to £1.2 billion during the period.

“M&S sustained trading momentum through the peak quarter and both food and clothing and home have delivered strong growth,” said chief executive Stuart Machin. “M&S Food outperformed the market on volume and value in the critical four-week Christmas period for the second year running and reached its highest ever recorded market share. Clothing and home delivered another outstanding performance, maintaining its market leadership position with its highest market share in seven years.”

M&S shop refit bearing fruit

Marks & Spencer has seen its clothing market share rise above 10% and is benefiting from the resilience of schoolwear and underwear sales, as well as its shop refitting programme. The company is upgrading well-performing high street outlets, while closing underperforming ones and replacing them with purpose-built out-of-town units.

Meanwhile, the retailer says it is seeing the benefits of reshaping the brand as an “omnichannel retailer,” with its platform delivering over 50% growth in third-party brand sales. These include Seasalt, Dune and Hobbs.

The company has also introduced a cost cutting programme to combat inflationary pressures. While it acknowledged the tough economic environment in its outlook statement, the retailer reiterated its previous earnings guidance for the full-year.

Shares in Marks & Spencer have recovered significant headway since hitting year lows of 91.8p in September but are still down 37% over the past 12 months to 146p. Analysts at broker Barclays think the shares could reach 155p, while those at Berenberg Bank think they could hit 198p.

The retailer looks likely to continue to show resilience during the current turbulent economic times. As such, the shares remain a long term buy. Marks & Spencer’s full-year results are due on the 24th May.

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