Marks & Spencer Group Plc shares gained after the UK food and clothing retailer reinstated a dividend for the first time since 2019 following progress with a decades-long turnaround.
Profit before tax and other items rose 75% to £360 million ($442 million) in the six months through September, M&S said Wednesday. Sales of food led the advance as M&S seeks to pull in customers for their full weekly shop with more affordable prices. The stock rose as much as 8.8%, the steepest increase in more than two months.
Clothing and home also grew sales despite unseasonably warm weather in September. M&S said profit will likely be weighted toward the first half and warned that favorable market conditions might worsen in 2024.
Chief Executive Officer Stuart Machin is making progress with M&S’s overhaul after many previous management teams struggled. The retailer is investing in new stores while closing underperforming outlets and stocking more popular third-party brands like Jaeger, Crocs and Estee Lauder.
“We’re only just beginning,” Machin said in the statement Wednesday. “Lots done, lots to do, lots of opportunity.”
The shares have almost doubled this year.
Clothing and home sales grew 5.7% in the first half with particular growth in holiday garments and denim. Store sales outperformed online and profitability was boosted by lower freight rates and cost reductions in logistics.
M&S is opening nine stores this month, totaling £80 million of investment. That’s part of a broader effort to close 67 underperforming shops and open 100 new format food outlets in the next couple of years.
Like rivals, M&S is gearing up for Christmas, saying customers are responding positively to the festive ranges.
M&S said the potential of its grocery joint venture with Ocado Group Plc has yet to be realized as the business reported a £23 million loss. Ocado Retail is in the early stages of restoring profitability, according to the company. Still, collaboration is increasing and more M&S food is being stocked by Ocado.
The retailer is pursuing a legal challenge against the UK government after its plan to demolish its store in Marble Arch, central London, and replace it with a new building was rejected earlier this year.
(Updates with shares)