Marks & Spencer has posted better than expected first-half results despite warm autumn weather taking a toll on sales at its pivotal clothing division.
Sales, underlying profit and margin all advanced in the period and the retailer reported that it is “well set up for the key Christmas period” although it noted market conditions remain challenging.
Marks & Spencer generated a 2.3% rise in underlying pre-tax profits to £268m in the six months to September 27, when group sales advanced 1% to £4.9bn.
Statutory pre-tax profit of £279.4m was just below the £280.6m achieved in the comparable previous period. The City consensus expectation had been approximately £253m.
General merchandise revenues fell 2.3%, and by 2.9% on a like-for-like basis. Clothing was down 1.6% in total and 2.2% like-for-like. The retailer reported that the warm September weather “adversely impacted the first half by c1.3%”.
In the first five months of the period, excluding the warm September, womenswear sales - the motor of the clothing business and a focus for improvement - were ahead 1.3% and are on an “improving trend”.
In the retailer’s second quarter general merchandise was down 4% like-for-like and clothing and footwear down 3.4% - there was 2.5% hit on the latter because of the unseasonable weather.
General merchandise gross margin climbed 150bps in the first fhalf, beating guidance of 100bps, helped by better sourcing and fewer promotions.
The retailer said that its differentiated food offer enabled it to generate a total first-half food sales rise of 3.6% and a like-for-like increase of 1%. In the second quarter the increases were 3% and 0.2% respectively.
M&S chief executive Marc Bolland said: “M&S delivered sales growth and increased profit in the first half despite a tough market, particularly in September.
“We are pleased with the progress we have made against our key priorities for the year: general merchandise gross margin, improving womenswear, driving food growth and cash generation.”
Sales through M&S.com, which was relaunched earlier this year, slid by 6.3% but the retailer said that showed improvement and that the online business is “on track for growth ahead of peak trading period”.
M&S upped its full-year general merchandise gross margin guidance from an increase of 100bps to between 150 and 200bps.
The rise in operating costs is now expected to be 3.5% rather than 4%.
M&S will speed up Simply Food store openings from 150 to 200 over three years.