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M&S pre-tax profits grow 29.7% but warns of the impact of inflation

Source: Mintel 25-05-2022

M&S has reported a two-year growth in profits before tax and adjusted items of 29.7% to £522.9 million in the year ending 2 April 2022. Statutory revenues for the same period are at £10.8 billion, up 6.9% on a two-year basis. The retailer’s clothing and home division grew by 3.8% against 2019/20, with online fashion sales up 55.6%. Store sales on the other hand were down 11.2%. The retailer also warned of the impact of the cost-of-living crisis saying “there is no current sign of inflation abating”.

Steve Rowe M&S chief executive officer, who is due to step down this year, said: “For me, what is important about these results is not just the restoration of profit and strong cash flow; it is that they demonstrate that M&S has fundamentally changed. While there is much more to do, the business has moved beyond proving its relevance and has the opportunity for substantial future growth.”

“M&S’s clothing business looks to finally have rebounded, with Steve Rowe’s turnaround plans for fashion showing signs of success just as he exits the company after leading it for six years. He has succeeded in his strategy to improve and tighten the fashion offering by reducing the option count in clothing by 20% on pre-pandemic levels, sharpening its own-brands and adding more inspiring and trend-led third party brands. Mintel’s latest brand research backs this up, showing that M&S has seen rising usage among women in the last 12 months. While its customer base is still skewed towards older women aged 55+, there has been a significant increase in women aged 35-44 shopping there for clothes for themselves.

M&S nevertheless warns that the worsening squeeze on consumer incomes will adversely impact clothing volumes, reducing the rate of sales growth in the second half of 2022. Its clothing business has already been impacted by factory cost prices, transport and freight costs, as well as supply issues in China.

M&S stands out as the most trusted fashion retailer, according to Mintel’s upcoming Womenswear – UK, 2022 report. This high level of trust in the brand has helped it to survive in the past, and as the retailer that consumers are most willing to pay more for, this will help it to stand out from its competitors as people reduce their overall spend on clothing and become more selective about where they shop.”

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