Marks & Spencer (M&S) plans to further step up local food sourcing as it seeks to deal with the “substantial headwinds” facing its Irish food business, the retailer said on Wednesday. The group said ongoing EU border issues caused by Brexit had cost it £13 million (€15.2 million) in the first half of the year, largely related to its business in the Republic.
Despite this, the Irish business helped to drive growth in the first half.
The company said it was taking steps to mitigate “substantial headwinds” facing the Irish food business, including restructuring its cost base and stepping up local sourcing. The retailer is also opening new hubs to bypass the UK network, with a hub planned for Croatia in 2022.
The company on Wednesday beat forecasts for first-half profit and raised its full-year outlook, adding to evidence that its latest attempt at an elusive turnaround is delivering.
The 137-year-old clothing and food group, one of the biggest names in British retail, said it made profit before tax and adjusting items of £269.4 million in the six months to October 2nd, well ahead of analyst forecasts of between £205 million and £264 million.
It made a loss before tax and adjusting items of £17.4 million in the same period last year.
The group said its international business reported operating profit of £35.9 million, with first half sales growing 142 per cent on 2019 /20, and 29 per cent on the previous year. Growth was being driven by the Republic and India, the company said.
Raised forecast
M&S raised its forecast for full-year profit before tax and adjusting items to about £500 million from previous guidance of over £350 million. The profit upgrade is only the second from M&S this century and follows one in August.
The first-half outcome was also ahead of the profit of £176.3 million made in 2019, before the Covid-19 pandemic hit trading.
Food sales increased 10.4 per cent on 2019, while clothing and home revenue was down 1 per cent, with full price sales up 17.3 per cent.
M&S believes the pandemic has masked the progress management has made in its latest turnaround efforts after years of false dawns.
Chairman Archie Norman and chief executive Steve Rowe have focused on transforming M&S's outdated culture, improving the quality and value of its clothing and food products, while reshaping its store estate and investing in technology and ecommerce, including a venture with online supermarket Ocado.
Shares in M&S, up 66 per cent so far this year, closed Wednesday at 226.5p, up 16.5 per cent on the day, valuing the business at £4.4 billion. – Additional reporting: Reuters
