M&S yesterday posted the first growth in its food business for two years.

Total food revenues rose 1.2% to £2.85bn in the six months to 28 September 2019, with like-for-like sales up 0.9%. However, revenues sank 7.8% in the half to £1.57bn in the troubled clothing & home division, with like-for-like sales down 5.5%, as the group battled availability challenges and slow progress in the turnaround plan.

Group revenues in the half fell 2.2% to £4.86bn, with like-for-like sales down 1.5% and profits sinking by 17.1% to £176.5m.

But what did analysts and commentators make of the results?


Clive Black at Shore Capital, the retailer’s house broker, was encouraged but said there was still much to do. He added that there needed to be trading progress in both operating camps (food and clothing & home) with profit upgrades for the stock to positively take off.

David Beadle at Moody’s said: “These results highlight the challenges the company faces as it attempts to reposition both its clothing & home and food businesses in a market which is characterised by high competition and weak consumer sentiment. For now, the company’s credit metrics remain solid, but its overall credit quality will continue to weaken until operational improvements are sustainably achieved.”

Thomas Brereton, retail analyst at GlobalData, said it was a tale of two divisions at M&S as the “floundering” non-food arm drove down profits.

“M&S’s half-year results continue to highlight the disparity of its two divisions,” he added.

“However, despite the swarm of negative numbers across the report, investors have picked out the silver lining of a food division showing early signs of rejuvenation, and its share price rose c.5% in early morning trading.

“But a pleasant performance in food is not enough to mask the woes in its C&H arm.”

He added that as the underperformance in clothing continued to weigh on the group as a whole, speculation that M&S may spin off its non-food UK business would only increase.

Ian Forrest, investment research analyst at The Share Centre, explained what it meant for investors: “There was certainly some good news for investors but today’s rally in the share price may be more out of relief than anything else. While the £75m in cost savings is welcome, the shares are still down 20% on the year and the market will want to see the improved performance feed through clearly into rising profits and better dividends.”

AJ Bell investment director Russ Mould said the disappointments were piling up for M&S like “unsold sweaters and cardigans on its shelves”.

“The theme is broadly the same as it has been for years. Food has done well but the clothing & home business is struggling - although a combination of low expectations and slightly improved recent trading helped give a bombed-out share price a bit of a lift.

“The company has already admitted it is well behind with its turnaround of this part of the business, reflected in the decision to fire its head Jill McDonald in July. CEO Steve Rowe has rolled up his sleeves to take more direct control, with the apparent attitude that if you need a job doing properly you should do it yourself.”

He added: “If food becomes increasingly successful, there may be pressure for the company to separate the two parts of the business.”