- M&S first-half underlying pre-tax profit increases 6.1%
- Performance driven by 0.2% growth in like-for-like food sales
- But general merchandise like-for-likes slip 1.2%
Marks & Spencer has reported a 6.1% jump in underlying profit during its first half, but sales slipped again in its troubled non-food division.
Underlying pre-tax profit increased to £284m in the 26 weeks ending September 26, as overall sales edged up 1.4% to £5bn. But pre-tax profit after one-off costs fell 22.7% to £216m, while store like-for-likes dropped about 6%, boss Marc Bolland told journalists on a conference call this morning.
General merchandise sales slipped 1.2% on a like-for-like basis, while total sales in the category were down 0.4%. M&S said the sales slips were caused by “unseasonal conditions and the decision to focus on full price sales.”
In April, M&S recorded its first quarterly growth in general merchandise sales in more than three years, breaking a run of 14 consecutive quarters of decline. But by July it slipped back into decline, as like-for-likes dropped 0.4%.
The retailer said unseasonal weather created “challenging” trading conditions during its first quarter, which resulted in “high levels of promotional activity” within the general merchadise category. M&S focused on full price sales during its second quarter, which affected sales performance, but delivered “strong growth” in gross margin.
Online and food
Online sales soared 34.2% during the period as bosses hailed “strong improvement” of its ecommerce operation.
Like-for-like food sales edged up 0.2%, driven by the retailer’s “differentiated offer”. Overall food sales rose 3.3% in the half-year, driven by the opening of 32 new Simply Food stores, which have performed “ahead of expectations”.
But M&S admitted the food division’s profit margin had been hit by unseasonal weather conditions during the summer, as shoppers shunned barbecue foods and created a higher than usual level of waste.
After raising the interim dividend by 6.3% to 6.8p per share, M&S boss Marc Bolland said: “We delivered good underlying profit growth in the first half and made strong progress against our key priorities.
“Our food business again outperformed the market by over 3 percentage points as our focus on quality and innovation continues to set us apart.
“In general merchandise we decided to improve profitability by focusing on gross margin, delivering another significant increase, which in part resulted in slightly lower sales.
“As a consequence of good performance and strong cash generation we have decided to increase our dividend.”
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