steve rowe m&s

Outgoing M&S boss Steve Rowe left on a high note this week

Marks & Spencer shook off inflationary gloom this week as shares rose healthily despite the retailer becoming the latest to warn profits in the coming year would take a hit as the cost of living crisis intensified.

A minimal contribution to the bottom line from the Ocado Retail joint venture, the decision to permanently cease operations in Russia and lack of additional business rates relief left M&S starting the new year from a lower profits base.

However, a sense of tangible progress made by Steve Rowe – who has now handed over the reins to a trifecta of new leaders – at the group over the past six years cheered investors.

Revenues in the year to 2 April increased 6.9% to £10.9bn, compared with pre-pandemic levels, while operating profits soared 20% to £709m on a two-year basis.

And its food business recorded growth of 10.1%.

The share price overcame early jitters as markets opened on Wednesday to close almost 1% higher. Shares climbed another 7.9% to 149.6p by the end of Thursday trading – an almost 10.7% rise for the week.

M&S, however, remains 37.3% down so far in 2022, as market confidence following two surprise profit upgrades last year – and the subsequent surge in value – ebbed away after Christmas.

Russ Mould at AJ Bell said investors would be breathing a sigh of relief shares didn’t tank given pressures on retailers such as Walmart and Target in the US recently.

“There was a chance Steve Rowe would leave on a sour note,” Mould said. “Fortunately, M&S pleasantly surprised… showing resilience, which it arguably lacked before Rowe became boss.”

Third Bridge analyst Ross Hindle sounded a note of optimism, highlighting the food business as a potential “secret weapon” against inflationary pressure rattling other supermarkets.

“Its premium brand positioning means it is less vulnerable pressure from discounters and many of the shoppers they lose will be replaced by new customers trading down from eating out.

“As M&S continues its transformation programme, benefits are expected to continue to flow to shareholders.”

Ocado wasn’t as fortunate as shares slumped 3.6% to a four-year low 737.2p as a trading update for the Ocado Retail jv dialled back profit expectations as customers added fewer items to their baskets as inflation started to bite.

Although, the group rebounded strongly on Thursday, with shares back up 9.1% to 839.8p, which left the stock 46% down for the year.