// M&S profits drop by nearly 24% as higher costs and investing in food prices hit profitability
// Despite the decline, M&S said it saw “robust” sales across food and clothing and home
Marks & Spencer’s half-year profits fell by almost a quarter after higher costs and pressure in household budgets hit the bottom line.
The retailer’s underlying pre-tax profits fell to £205.5 million in the six months to October 1 as it took a hit from investing in food prices and higher costs, as well as more difficult trading in its Ocado retail joint venture.
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Despite the decline, M&S saw “robust” sales across its food and clothing and home categories.
However, the retailer warned of “more challenging” trading ahead in the cost crisis and said it was looking to cut costs by around £150 million in 2023-24 to offset soaring inflation and help it weather the storm.
Standout clothing sales
Clothing and home was the “standout performer” with like-for-like sales surging 13.7% as its bounceback gathered pace.
Total clothing and home sales rose 14% with store sales up 18.8%, and online up 4.9% against strong comparatives. Adjusted operating profit reached £171.4 million in the division thanks to a “strong sales growth and full price mix”.
Meanwhile, like-for-likes rose 3% in its food business with total food sales up 5.6%.
Adjusted operating profit fell to £71.8 million in food “reflecting value investment and cost pressures”.
Ocado Retail revenue declined 4.2% and the contribution to group share of net loss was negligible at £700,000.
During the pandemic, Ocado Retail experienced very strong trading conditions, which translated into a strong profit performance.
Following this period of demand distortion, “a renewed attention is now required to reinforce Ocado Retail’s unrivalled proposition of market leading quality, service and choice underpinned by M&S Food,” the retailer said.
M&S said it is continuing to invest in online and sales of third-party brands more than doubled.
“Trading in the first half has been robust, with both businesses growing ahead of the market, reflecting the beginnings of a reshaped M&S,” M&S CEO Stuart Machin said.
“This progress means we face into the current market headwinds with an increased resilience and level of confidence.
“Looking beyond the current stormy weather, much is in our control and our mandate is clear – to step up the pace, accelerate change, drive a simpler, leaner business and invest in growth opportunities to build a reshaped M&S.”
