Marks & Spencer’s Christmas sales surge sparks dividend and FTSE 100 hopes
Marks & Spencer looked to be back today after reporting blockbuster trading over Christmas, sparking chatter of a possible resumption of its dividend and return to the FTSE 100.
Sales soared by 8.9% on pre-pandemic levels to hit £3.27 billion in the 13 weeks to 1 January, M&S said. Every division registered growth, including clothing and home. The department has been a consistent sore spot for the company — dubbed a “problem child” by one analyst this morning — but sales rose 3.2% over Christmas to mark the second consecutive period of growth.
M&S said it was now “more confident” that profit for the full-year will be “at least” £500 million. Previously it had said earnings would be “in the region of” that figure.
CEO 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.”
Rowe, an M&S lifer, has been running the department store since 2016. He is the latest in a procession of CEOs called in to try and turnaround the perennially underperforming retailer.
Unlike predecessors, Rowe’s plan actually seems to be working. Sales have returned to growth and last year the business delivered its first profit upgrades this century.
Ross Hindle, an analyst at Third Bridge, said: “A resurgent M&S was Britain’s fastest-growing retailer over the Christmas quarter.”
The strong performance over Christmas, which was ahead of City forecasts, stoked hopes that M&S could soon reinstate its dividend and return to the FTSE 100.
M&S dropped out of the FTSE 100 for the first time ever in September 2019 and scrapped its final dividend in March 2020 as the pandemic struck. Covid initially battered the business, with thousands of jobs cut under its shell-shocked sounding “never the same again” strategy.
Performance improved markedly last year and today’s figures suggest it may have been more than just a pandemic bounce back.
Neil Wilson at Markets.com said today’s numbers would “keep investors focused on the long-term and hope that it means a return of the dividend.”
2022 could also herald a return to the topflight index. Shares have risen 85% over the last 12 months to give the retailer a market value of £4.7 billion. That puts it ahead of the FTSE
100’s smallest company, Pearson (£4.5 billion), at today’s prices.
M&S gave up 14.5p, or 5.8%, to reach 238.8p. Analysts said it was profit taking after a strong run. Some were also disappointed that M&S did not deliver a more chunky profit upgrade like rivals.
Laura Hoy, Equity Analyst at Hargreaves Lansdown, said: “MKS stock has climbed markedly higher since the start of the pandemic, and it will take a lot more than a nudge to profits to sustain those expectations.”
M&S joins a string of other High Street names in reporting bumper festive trade. Sainsbury’s, JD Sports, and Dunelm all put out profit upgrades on Wednesday after what looks to have been a strong Christmas.