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Marks & Spencer (M&S) has credited further progress in its turnaround strategy for a 75% surge in profits, achieved despite £30m of discounting to lure food shoppers amid the supermarket price war.
The company, which returned to the FTSE 100 in September after four years of relegation, said it was to restore an interim dividend for the first time in four years, helping its shares surge at the market open.
Profit before tax and adjusting items for the six months to the end of September came in at £360.2m – up from £205.5m in the same period last year.
The performance was driven mostly by its food division, with total sales up by almost 11% at £6.2bn.
However, the retailer warned that the second half, which includes the core Christmas season, was unlikely to be as strong despite continued momentum so far, aided by its festive ranges.
M&S blamed an uncertain economic outlook and challenging comparative numbers.
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Sales growth for its two main divisions food and clothing and home – up by 14.7% and 5.7% respectively – marked continued progress for the company while its partnership with Ocado dragged, delivering a £23m loss.
News of the joint venture in 2019 spooked investors and culminated in the share price slump that led to its drop to the mid-cap FTSE 250.
M&S said on Wednesday that it was working to boost its “reset” strategy for the Ocado partnership, admitting it was in the “early stages of investment in value, service and increased M&S range”.
Its wider turnaround efforts have included the closure of underperforming stores and bolstering fashion ranges while, at the same time, investing in its online sales offering.
Chief executive Stuart Machin told investors: “Our strategy to reshape M&S for growth has delivered strong results in the first half.
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“We have maintained our relentless focus on trusted value, giving our customers exceptional quality product at the best possible price.
“In food, we delivered over 500 quality upgrades and invested over £30m in price, lowering the price of 200 products and locking prices on 150 customer favourites.
“Our lead on quality perception widened and value perception continued to improve.
“In clothing & home we backed lines with authority across core and seasonal product, maintaining our lead on quality and value perception and improving our style credentials.
“As a result, we’ve sold more product and served more customers across food and clothing & home, with both businesses outperforming the market.”
An interim dividend of 1p per share was proposed.
Shares – up by more than 80% in the year to date ahead of the results – rose by more than 10% at the open.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said there was one stand out area for the company.
“Good progress in Clothing and Home, where Marks & Spencer has struggled in recent years, has to be commended.
“It shows the extent to which the company has regained its style credentials and it is particularly admirable given the pressure on sales of discretionary items amid the cost-of-living crisis.
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