UK retailer Marks and Spencer said it is making continued progress on its turnaround drive this morning (5 November), as it booked first-half sales that beat market expectations.
The company said group sales rose 3.6% to GBP4.9bn (US$7.86bn) in the first six months of the year, slightly above consensus estimates of GBP4.84bn. UK like-for-like sales gained 0.7%, with a strong performance from the food business offsetting weakness in general merchandise. First-half like-for-like food sales were up 2.5% in the period. International sales rose by a total of 8%, M&S added.
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As the group continues to invest in its turnaround programme, increased capital expenditure hit operating profit. Underlying profit before tax fell to GBP261.6m, compared to GBP287.3m in the comparable period of last year.
Nevertheless, M&S shares were trading up this morning as investors reacted positively to the group’s insistence that its capex levels will drop next year.
CEO Marc Bolland commented: “This year marks the final year of elevated capital investment in the business. From 2014/15 we will move to a lower, more sustainable long-term investment level of circa GBP550m. This, combined with the operational improvements we are making, makes us confident that we will deliver a material improvement in free cash flow from 2014/15, and we remain focused on delivering improved shareholder returns.”
M&S also confirmed its full-year outlook. “Given continued pressure on disposable incomes, we remain cautious about the outlook for the remainder of the year. However, we are well set up for the key Christmas trading period with more innovation and choice than ever before. Our overall expectations for the full year remain unchanged,” the company said.
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By GlobalDataM&S shares were up 2.85% at 10 am (GMT) today, climbing to GBP5 a share.
