M&S Food Hall

M&S shares are trading at a five-year high and are up more than 80% over the past year

Investors lapped up declarations from Stuart Machin of Marks & Spencer entering a new era as a hard-fought and long-awaited turnaround started to bear fruit.

The high street bellwether boasted it was now in the “strongest financial health since 1997” and announced its first dividend since 2019.

Its food operation – the jewel in the M&S crown – and, crucially, the clothing division were both firing on all cylinders in the year to 30 March 2024, with both businesses having now delivered 12 consecutive quarters of sales growth.

M&S also outperformed its major supermarket rivals in terms of volume growth, helping it gain market share, albeit from a very small space compared to the likes of Tesco and Sainsbury’s.

It all helped the retailer post bumper adjusted pre-tax profits of £716.4m – a rise of 58% year on year and also above analyst expectations.

Machin also said the wind was in the group’s sails and he talked of a “growth story for years to come”.

Shares soared by 10% as markets opened on Wednesday morning and closed 4.4% higher at 285.7p. The stock, which made its return to the FTSE 100 last year, is trading at a five-year high and is up more than 80% over the past year.

Analysts at Peel Hunt felt shares had plenty more room to improve, upgrading its target price from 345p to 360p.

“This time we really believe that management has the capability of genuinely turning M&S around, and our ‘buy’ recommendation has much further to run,” Jonathan Pritchard said.

“It is clear the product innovation in food, and the value credentials this brings, are appealing to customers and, from the current positions, it is difficult to see how the food-based competition can peg M&S back.”

AJ Bell investment director Russ Mould agreed that based on the results, it looked like M&S had achieved a permanent change.

“The turnaround story has been years in the making and it finally looks like the retailer has cracked it,” he added. “Food products are flying off the shelves and it’s at long last struck at chord with shoppers on the clothing side.”

Mould highlighted the Ocado Retail joint venture losses as one dark spot.

“Despite this positive situation, there is still a lot more to do,” he said. “The Ocado joint venture needs to pull its socks up and the international operations aren’t as strong as they once were. By its own admission, Marks & Spencer needs to move faster with efforts to offer a more personalised service. Fortunately, having the core business do well means it can afford to take a bit longer to fix the other bits.”

Other big share movements this week came at Greencore, SSP Group and Naked Wines.

Sandwick maker Greencore rocketed 19% higher to 165.6p on Tuesday as a transformation plan under CEO Dalton Philips took hold. The group’s shares were boosted by rising first-half profits, upgraded full-year forecasts and a £30m share buyback.

Contrastingly, shares food-to-go operator SSP Group slumped 9% to 190p after it missed profit expectations in the first half.

But investors were impressed with progress made by embattled Naked Wine in its turnaround, with shares up 27% this week to 63.2p following a pre-close trading update.