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M&S total group revenues for the 52 weeks to 1 April increased 9.6% to £11.9bn

Marks & Spencer shares jumped to 15-month highs this week on evidence it is finally emerging from what has been dubbed the “longest turnaround in corporate history”.

While underlying profits remained under pressure amid contracting margins, investors were buoyed by a sales performance that saw double-digit growth across its clothing & home business, while its food arm continued to outperform the market.

Total group revenues for the 52 weeks to 1 April increased 9.6% to £11.9bn as the turnaround continued at clothing & home, with general merchandise sales in store up 14.9% and online up 4.8%.

Food sales jumped 8.7% to £7.2bn in the year, with like-for-likes up 5.4%, as the company benefited from its premium positioning and from a recovery at the hospitality and franchise side of the division, which was hit during the pandemic.

However, underlying profits for the year dropped to £482m compared with £522.6m in the previous period, with retail margins declining. M&S stressed it had avoided passing on the full cost of inflation to customers in the food business, resulting in margins shrinking and operating profits slipping 10.7% to £248m. Meanwhile, profits were hit by the online offering in partnership with Ocado making a loss and the previous £60m boost from business rates relief flattering the prior period.

M&S also said it had seen “a good start” to the new financial year, with food and GM sales growing, but it warned the economic outlook for consumer spending was uncertain given cost inflation remained high.

Russ Mould, investment director at AJ Bell, said there were “finally signs that Marks & Spencer has struck the right formula”after what “feels like the longest turnaround in corporate history”. “Rather than the usual story of strong food sales making up for weakness in clothing, both parts of the business are now doing well,” he noted.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said the reinstatement of the group’s dividend “was the icing on the cake”, while noting the results suggested the group’s core customers were not proving as sensitive to price as those at other grocery retailers.

Broker Peel Hunt upgraded its forecasts on the stock, noting that preconceptions were changing around M&S. “Value perception is better in food, and style perception is up too,” it noted.

“The shares reflect the lack of belief in the UK shopper and the numerous unsuccessful attempts at recovery that M&S has made in the past. There are very encouraging signs surrounding this one though.”

M&S shares jumped 12.9% to close at 184.8p on Thursday – the stock’s highest level since February 2022, up by more than 30% year on year.