MARKS AND SPENCER’S shares rose more than three per cent as it signalled progress in its turnaround programme in its first-half results.
The store was hindered again in its push to rejuvenate clothing and home figures but a near one per cent rise in like-for-like food sales was more comforting, and the link-up with Ocado is hailed as a key future factor.
However, one analyst warned that there is “still a lot of work to be done to transform one of the UK’s most iconic brands”.
The high street bellwether saw overall sales slide 2.1% to £4.86 million for the six months to September 28.
READ MORE: New M&S stores to open in Scotland this year
The company highlighted the performance of its food business, but saw clothing and home sales dive7.8% on the back of buying and supply chain issues.
M&S said it had “poor availability on the most popular sizes and too much stock and markdown” on its clothing lines.
It added that it saw a sales uplift in October after taking action to improve availability and has had an encouraging relaunch of its Per Una sub-brand.
M&S also reported weaker-than-expected online sales, as digital revenues jumped just 0.2% despite an 8% increase in website traffic.
Like-for-like food sales increased by 0.9% driven by an acceleration in the second quarter.
The company said it has benefited from price reductions on a range of core food products and almost halved its number of promotions.
Trading profits slid 17% to £176.5m during the half-year.
M&S said it has closed 17 stores as part of its turnaround plan which it earlier said will see the closure of 100 stores across the UK.
READ MORE: Ice-cream maker wins M&S supply contract
It said it made £75m in cost savings during the period as a result.
The company also reduced its dividend by 40% to 3.9p, as it had previously indicated would happen as a result of the transformation programme.
Steve Rowe, M&S chief executive, said: “Our transformation plan is now running at a pace and scale not seen before at Marks & Spencer.
“For the first time we are beginning to see the potential from the far-reaching changes we are making.”
Mr Rowe added that the timing of the December General Election had not yet had any impact on trading but it is a period of “constant volatility”.
He said: “This is not specific to a General Election, but anything that distracts consumers at this time is not good for retailers.”
Infographic: Marks and Spencer in Scotland
Mr Rowe also said: “The food business is outperforming the market. Our deal to create a joint venture with Ocado is complete and plans to transition to the M&S range are on track.
“In clothing and home we are making up for lost time. We are still in the early stages, but we are clear on the issues we need to fix and, after a challenging first half, we are seeing a positive response to this season’s contemporary styling and better value product. Our cost reduction and store technology programmes are on track.”
During the period, M&S also completed its £750m joint venture deal with Ocado Retail and said plans for M&S supply have been “progressing well”.
Shares rose 3.5% to 188.65p on the news.
READ MORE: Marks and Spencer to close 25 food stores under estate rethink
Chris Beauchamp, chief market analyst at IG, said: “The 3% rise in M&S shares looks odd given the fall in adjusted profit and the dividend cut, but the shares had lost 15% since their October high, so were primed for a bounce, if only a brief one.”
David Beadle, a Moody’s vice president, said that the results “highlight the challenges the company faces as it attempts to reposition both its clothing and home and food businesses in a market which is characterised by high competition and weak consumer sentiment”.
Arlene Ewing, of Brewin Dolphin, said that “the positive remains the food business, which delivered like-for-like sales growth.
She said: “The deal with Ocado also appears to be on track, which could make a significant difference to Marks and Spencer’s food offering when it is fully in place.
“However, there is still a lot of work to be done to transform one of the UK’s most iconic brands, especially at its struggling divisions.”
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