- Grocery volume growth of 7 per cent
- Notable value range sales uplift
Marks & Spencer's (MKS) shares were marked down by 5 per cent despite a strong volume showing over Christmas, as sales growth slowed from the retailer's first half and investors gave the thumbs down to management’s comment that the business faces “additional cost increases from higher-than-anticipated wage and business rates related cost inflation”.
Like-for-like food sales were up 9.9 per cent for the 13 weeks to 30 December, compared with growth of 11.7 per cent in the first half. The company's pricing approach of inflating below the market paid off, however, with volume growth of 7 per cent in the period making it the top grocery performer "over the Christmas period and the quarter”, according to management. Sales of the 'Remarksable' value range soared by 18 per cent.
Clothing and home sales growth of 4.8 per cent was also lower than the interim figure, but it was a good sign for the business that fewer items in this channel were sale items, and the update noted that the division enjoyed its highest full-price market share in over a decade. International sales, by far the smallest contributor to the top line, fell 6.4 per cent due to shipment timings and tough trading conditions in India.
M&S shares more than doubled in 2023, with profits outstripping consensus forecasts as chunky cost savings were delivered. The share price slip on update day must be seen in this context, and management was ultimately sensible in taking a cautious line on cost pressures and economic headwinds.
We see further potential from the company's ongoing transformation, with work continuing to improve supply chains, accelerate store rotations and improve market share.
Last IC View: Hold, 247p, 8 Nov 2023
