Marks & Spencer Shares Rise on Profit Surge

We
don’t
expect
to
materially
change
our
230p
fair
value
estimate
for
Marks
&
Spencer
after
accounting
for
strong
full-year
results
and
rolling
our
model
forward.
Shares
trade
in
2-star
territory.

Strong
Foundation
for
Growth
at
Marks
&
Spencer

Marks
&
Spencer
reported
strong
fiscal
2024
results
with
market
share
gains
across
clothing
and
food.
Group
sales
were
up
9.4%,
driven
once
again
by
food
sales,
which
were
up
13%,
with
like-for-like
sales
up
11.3%
driving
volume
and
market
share
gains
to
3.7%
from
3.55%.
However,
more
importantly,
consistent
volume
growth
was
ahead
of
the
market,
up
6.7%
and
9.7%
in
the
fourth
quarter
and
third
quarter
respectively
versus
flat
for
the
market,
according
to
Kantar.

The
food
segment’s
adjusted
operating
profit
of
£395.3
million
implies
a
margin
of
4.8%
versus
£248
million
and
3.4%
margin
respectively
last
year
with
the
remarkable
improvement
reflecting
operating
leverage
and
benefits
from
sourcing
and
structural
cost-savings.
The
clothing
and
home
division
grew
by
5.3%
(like-for-like
sales
up
5.2%)
leading
to
robust
market
share
gains
of
10%
from
9.6%,
according
to
Kantar.
The
clothing
and
home
segment’s
adjusted
operating
profit
increased
to
£403
million
or
a
10.3%
margin,
from
£324
million
and
8.7%
respectively
last
year
as
a
result
of
higher
gross
margins,
in
turn,
supported
by
full-price
sales
and
cost-savings.

The
international
business’
priorities
have
been
reset
under
the
new
leadership
to
build
a
stronger
foundation
for
long-term
growth
and
address
the
recent
and
persistent
underperformance
as
sales
continue
to
disappoint,
being
down
1%
in
the
year.
Ocado
Retail
had
previously
reported
sales
growth
of
11.2%
and
adjusted
EBITDA
of
£26.8
million
with
Marks
&S
pencer’s
share
of
the
adjusted
loss
increasing
though
due
to
higher
interest
costs. 
We
don’t
expect
to
materially
change
our
230p
fair
value
estimate
for
Marks
&
Spencer
after
accounting
for
strong
full-year
results
and
rolling
our
model
forward.
Shares
trade
in
2-star
territory.

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