Marks and Spencer Group delivered "another good Christmas" with record-breaking sales across its businesses, and yet, the uncertain outlook and heightened cost expectations led to a decline of over 6% in its share price during midmorning trading. The British retailer experienced a remarkable 5.6% year-over-year increase in total group sales, reaching 4.06 billion pounds sterling for the 13 weeks ending December 28, 2024, as indicated in a Thursday trading update.
The primary contributor to this success appears to be the food sector, which saw an impressive rise of 8.7% during the Christmas trading season, resulting in sales of 2.58 billion pounds. Particularly notable was the double-digit growth in core categories such as meat, produce, groceries, and in-store bakery, which coincided with a surge in the number of customers and transactions. In the clothing, home, and beauty division, sales during the fiscal third quarter rose by 1% year-on-year, amounting to 1.31 billion pounds.
This segment reported an impressive 11.7% increase in online sales; however, overall store sales saw a decline of 1.5%, partly attributed to adverse weather conditions. Analysts at RBC Capital Markets remarked, "M&S has reported a Q3 trading update this morning with LFL sales growth ahead of our expectations for Food and Clothing & Home.
We don't expect much change to consensus PBT forecasts today (FY25 c.[GBP]840mn) but see the risks as more to the upside given the ongoing momentum in the business." This indicates that, while current challenges exist, the overall outlook remains positive due to M&S's adaptability. Looking forward, Marks & Spencer has warned of potential challenges stemming from inflation, interest rates, and rising costs associated with taxation.
Despite these hurdles, the group is optimistic about making further advancements during the remainder of the fiscal year by concentrating on controllable elements to foster growth. RBC noted, "We think M&S has been making good progress with its Food business, aided by an improved value-for-money perception.
Meanwhile, its Clothing line has benefited from a stronger digital proposition, collaborations with third-party brands, and enhancements in style, quality, and perceived value." This multifaceted approach underscores M&S's commitment to evolving its business model in response to market demands..