Skip to Content

Marks & Spencer Earnings: Solid Top and Bottom-Line Momentum Continues With Food Leading the Way

Consumer Cyclical Sector artwork

Marks & Spencer MKS reported another robust set of results in its fiscal 2024 half-year. Group sales were up 10.8% driven once again by food sales, which were up 14.7% (like-for-like sales up 11.7%), driving volume and market share gains against mainline grocers. The clothing and home division grew by 5.7% (like-for-like sales up 5.5%) with resilient full-price sales and the click-and-collect channel (reduced fulfillment costs) contributing to improved profitability. International and Ocado Retail sales were up 3.9% and 6.9%, respectively. On profitability, the adjusted operating margin recovered to 4.3% from 2.2% last year in food, driven by volume growth and manufacturing efficiencies. Margins in clothing and home also recovered to 12.1% from 9.8% last year, supported by a higher proportion of full-price sales (82%), cost-savings in the logistics network, and lower freight rates than anticipated. Management remains cautious about its outlook and said it expects profit before tax and adjusting items to be weighted toward the first half. Profit-before-tax and adjusting items were ahead at GBP 360.2 million versus GBP 205.5 million last year. Marks & Spencer’s share of Ocado Retail’s net income-to-group results was negative GBP 23.4 million due to the continued effect of costs related to new and excess capacity. Given the widespread improvement in operating performance across the business and a stronger balance sheet, and as previously announced, the firm is restoring a modest annual dividend to shareholders (GBX 1 per share). We don’t expect to change our GBX 185 fair value estimate for Marks & Spencer after accounting for these results. Given the strong beat in top-line growth and profits, shares were up as high as 9% intraday, pushing the stock further into 2-star territory.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

About the Author

Ioannis Pontikis

Senior Equity Analyst
More from Author

Ioannis Pontikis, CFA, is a senior equity analyst for Morningstar Holland BV, a wholly owned subsidiary of Morningstar, Inc. He covers European food retail and food ingredient companies such as Tesco, Carrefour, Associated British Foods, and Chr. Hansen.

Before joining Morningstar in 2017, Pontikis spent more than six years at Athens-based value shop SilentSeas, where he worked as a generalist covering small caps and focused on deep-value situations, particularly in companies owning hidden, undervalued assets. Prior to that role, he worked at Nestle as a financial analyst and at Ernst & Young as a consultant.

Pontikis holds a bachelor’s degree in business administration from the University of Piraeus and a master’s degree in finance from the London School of Economics. He also holds the Chartered Financial Analyst® designation.

Sponsor Center