British store chain Marks and Spencer (LON: MKS) recorded a rebound in its sales of clothing and a record performance in food over the holidays, leading it to raise its forecasts.
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Strong Performance Through Christmas Period
The whole group, by integrating food and international activities, saw its sales increase by 18.5% over one year, to 3.27 billion pounds, for the 13 week period before January 1. The increase is 8.6% compared to the last pre-pandemic holidays.
The weak point of the brand, clothing, increased by 37.7% over one year, and is slightly above its pre-pandemic level.
The group is catching up a little of its delay in online transactions: a third of the sales of the branch took place online. These have increased by more than 50% since the onset of the pandemic.
At the same time, store sales fell by 10.8% (over two years), with an increase in shopping areas, which continue to surpass city-center stores.
On food, the company saw the highest Christmas sales on record thanks to growth in December, in line with the performance of the quarter.
The brand’s products also sold well on the site of its partner, the online food distributor Ocado, representing around 30% of baskets for the month of December.
Marks & Spencer now expects a full year profit before tax and adjusting items of at least £500m.
Management Commentary
Marks & Spencer chief executive Steve Rowe said, “Trading over the Christmas period has been strong, demonstrating the continued improvements we’ve made to product and value. Clothing & Home has delivered growth for the second successive quarter, supported by robust online and full price sales growth. Food has maintained its momentum, outperforming the market over both 12 and 24 months. The market continues to be impacted by the headwinds and tailwinds that we reported in the first half, but I remain encouraged that our transformation plan is now driving improved performance.”
Wall Street’s Take
Last week, Berenberg Bank analyst Thomas Davies kept a Buy rating on MKS with a 265p price target. This implies 13.7% upside potential.
Overall, MKS scores a Moderate Buy consensus rating among analysts based on five Buys and four Holds. The average Mark and Spencer price target of 253.33p implies 8.7% upside potential to current levels.
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