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‘Beginnings of a new M&S’ hailed as retailer firmly back in fashion

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Marks & Spencer reported a surge in underlying pre-tax profits to £716.4 million in the year to March 30, from £453.3m in the prior 12 months.

The results were headed: “The beginnings of a new M&S.”

Food sales rose 13% during the year. Clothing and home sales were up by 5.3%.

Shares in Marks & Spencer rose by 14.2p, more than 5%, to 288p.

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Mr Machin declared: “Two years into our plan to ‘Reshape for Growth’ we can see the beginnings of a new M&S. Food, and clothing and home grew volume and value share ahead of the market and sales increased across stores and online. Both businesses have now delivered 12 consecutive quarters of sales growth and this trading momentum gives us wind in our sails, and confidence that our plan is working. We are becoming more relevant, to more people, more of the time.”

He added: “We remained unswerving in our commitment to trusted value, offering customers exceptional quality at the very best price. Food’s leading quality perception increased even further with over 1,000 products upgraded and 1,300 new lines launched. Continued progress was made on value perception, with £60 million invested in price. In clothing and home, style perception continued to improve.”

Mr Machin claimed Marks & Spencer’s “decisive lead on quality and value perception was extended” in clothing and home.

The retailer flagged its “capacity to accelerate high returning investment and to restore a full-year dividend of 3 pence per share”.

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Mr Machin declared: “Disciplined capital allocation underpins our plan, and the financial health of the business is as strong as it’s been in decades. Free cash flow has increased, financial net debt has been eliminated, and returns on investment have improved. The strength of the balance sheet, coupled with the sustained improvement in performance, means we have the headroom and confidence to invest for future growth as well as introduce a 3p dividend.”

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Russ Mould, investment director at stockbroker AJ Bell, said: “As Marks & Spencer knows from first-hand experience, corporate turnarounds are tricky to achieve and even harder to sustain. There tend to be some quick wins but changing the culture is harder than climbing Mount Everest and it’s easy for businesses to slip into old habits, often to their detriment.

“Judging by Marks & Spencer’s latest results, it might be one of the select few companies to achieve permanent change. The turnaround story has been years in the making and it finally looks like the retailer has cracked it. Food products are flying off the shelves and it’s at long last struck a chord with shoppers on the clothing side. Improved free cash flow has helped to strengthen the balance sheet, bring back dividends for shareholders, and provide options to accelerate investment in the business.”

He added: “In an environment where so many retailers are struggling, Marks & Spencer has snatched the crown from Next and become the shopkeeper which others aspire to be. It’s back on top and 12 consecutive quarters of sales growth cements its new-found status as the UK’s retail champion.”

However, Mr Mould emphasised his view that “despite this positive situation, there is still a lot more to do” for Marks & Spencer.

He said: “The Ocado joint venture needs to pull its socks up and the international operations aren’t as strong as they once were. By its own admission, Marks & Spencer needs to move faster with efforts to offer a more personalised service. Fortunately, having the core business do well means it can afford to take a bit longer to fix the other bits.”

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