Marks and Spencer Group PLC (LSE:MKS) upgraded full-year guidance and said it returned to profit in the first half, exceeding pre-Coronavirus (COVID-19) levels.
The clothing and food retailer said trading for the first four weeks of the second half was consistent with growth rates reported in the second quarter, and ahead of its expectations.
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It expects strong demand to keep up, driven by the bounce-back after lockdowns and improved customer perception of the brand.
The FTSE 250 group noted the cost pressures seen elsewhere in the market will become increasingly steeper, especially as it boosts investment for productivity plans, store rotation and technology in the coming year.
Full-year profit before tax and adjusting items is now predicted to be around £500mln, though capital expenditure will be lower than expected at £250mln, mostly due to supply chain. Net debt is likely to reduce more than previously anticipated.
Over the next three years, M&S plans to deliver progressive growth in sales, market share and profit in Food, Clothing & Home (C&H) online sales to exceed 40% of total sales, alongside an overall C&H profit margin above 2019 levels.
In the 26 weeks to 2 October, profit before tax was £187mln, from an £87mln loss last year, and above a £158mln profit two years ago.
Food sales surged over 10% and C&H sales dipped 1% but the online arm climbed 61% and now accounts for 34% of total C&H sales.
Net debt fell to £3.1bn, down 23% on 2019 levels. The group didn’t declare a dividend.
The online grocery joint venture with Ocado Group PLC (LSE:OCDO) opened three new fulfilment centres during the period, with capacity growing over 50% since M&S invested.