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Marks & Spencer has upgraded its expectations for the year for the second time as its sales and profits leapt ahead of pre-pandemic figures.

However, the high street bellwether warned that costs pressures in the supply chain would get “progressively steeper” going forward.

Revenues in the 26 weeks to 2 October increased 5% to £5.1bn, compared to the same period in the 2019/20 financial year before the pandemic hit.

The retailer’s food sales jumped 10.4% in the half, while clothing and home figures were down just 1%.

It lifted M&S back into the black, with a pre-tax profit of £187.3m, compared to a £87.6m loss a year ago and pre-pandemic profits of £158.8m.

Consumer demand remained high as the second half got underway as the group’s transformation continued, leading to an upgrade in profit forecasts, with a bottom line in the region of £500m now expected. It follows an earlier surprise upgrade in the summer.

Shares in M&S have rocketed as markets opened this morning, shooting up 16.5% to 227.1p. It’s the highest the stock has been since May 2019.

CEO Steve Rowe said: “Given the history of M&S we’ve been clear that we won’t overclaim our progress.

“Unpacking the numbers isn’t a linear exercise and we’ve called out the Covid bounce back tailwinds, as well as the headwinds from the pandemic, supply chain and Brexit, some of which will continue into next year.

“But, thanks to the hard work of our colleagues, it is clear that underlying performance is improving, with our main businesses making important gains in market share and customer perception. The hard yards of driving long-term change are beginning to be borne out in our performance.”

M&S said its food sales in the half grew 16.9% when adjusting for the hit to the hospitality and franchise travel part of the business.

The retailer’s partnership with Ocado struggled to match the heights of demand a year ago when the first national lockdown was in effect.

Compared to 2020/21, customer orders grew by about 19%, but revenue declined 2.7% over the 26 weeks ended 29 August 2021. M&S product sales on Ocado Retail were about £309m, or 27% of total sales.

Growth was also affected by the fire at Ocado’s CFC in Erith during the period.

Average basket size was £124 compared with £151 last year as it returned to pre-Covid levels.

The fire at Erith CFC on 16 July and the additional safety measures put in place impacted revenue, which declined 19% in the final seven weeks of the period.

However, M&S said it continued to have a strong programme of capacity growth in Ocado Retail and expected to deliver strong revenue growth in FY 2021/22.

“In addition, Ocado Retail has been impacted by the industry wide labour market and logistics issues requiring investment in colleague development, retention and reward, which will put pressure on costs in the remainder of our financial year,” M&S added.

Morning update

Glanbia has agreed to sell its 40% stake in Irish dairy processor Glanbia Ireland to its joint venture partner Glanbia Co-operative Society for €307m (£262.3m).

It comes as the group looks to realign its portfolio and focus on its ingredients divisions and on sports nutrition.

Glanbia said it would use the proceeds from the deal to invest in growth opportunities for the two arms of the business, with up to half the money set to be returned to shareholders via a share buyback.

MD Siobhan Talbot said the deal represented the next stage of the transformation journey following many years of collaboration with Glanbia Co-op as joint venture partners in Glanbia Ireland.

“If approved, the proposed transaction will continue the alignment of our portfolio to our strategy, which is focused on driving growth through our market leading positions as a brand owner and ingredient solutions provider, playing into strong underlying consumer health and wellness trends.”

Glanbia Ireland is the largest milk processor and grain buyer in Ireland, producing a range of value-added dairy ingredients and consumer products as well as selling farm inputs.

It operates 11 processing plants, 52 agri retail branches and has more than 2,000 employees.

In the 2020 financial year, GI generated €1.9bn in revenues and a profit after tax of €60m.

The business will change its name following completion of the deal to something that doesn’t include ‘Glanbia’.

Shares in the group increased 1.7% to €14.29 this morning.

The group also release a trading update for the third quarter ended 2 October, with revenues up 15.7% thanks to “good demand” across both Glanbia Performance Nutrition and Glanbia Nutritionals.

Glanbia now expected its earnings per share to be at the upper end of the guided range of 17% to 22%.

Talbot added: “As we exit 2021 we will maintain our focus on driving top line growth and are planning further pricing actions for early in 2022 in response to the continued inflationary environment.”

The FTSE 100 bounced back 0.4% to 7,299.70pts this morning.

Other food and drink risers, aside from M&S and Glanbia, included SSP Group and Greencore Group, up 2% to 275.5p and 1.8% to 136p respectively.

Early fallers included Just Eat Takeaway, down 3.8% to 5,179p, Nichols, down 2% to 1,220p, Kerry Group, down 1.8% to €115.40, Naked Wines, down 1.4% to 689p, and Science in Sport, down 1.4% to 68p.

Yesterday in the City

The FTSE 100 fell back 0.4% to 7,274.65pts yesterday.

Tesco shares rose 1.1% to 278p as the latest Kantar grocery data showed it was the only supermarket to grow sales in the past 12 weeks. Shares in the business have soared 21% higher in the past six months.

In contrast, Sainsbury’s - the only listed rival left on the stock market following the Morrisons deal - fell 0.2% to 288.5p.

Marks & Spencer had a good day as markets anticipated an optimistic statement this morning. The stock jumped 1.9% to 194p - its highest level since August 2019.

Online grocer Ocado also increased 3.1% to 1,755p.

Primark owner Associated British Foods rocketed up 8% to 2,007.7p after releasing its full-year results.

Shares in Coca Cola Europacifc Partners rose 4.2% to €48.95 as the drinks market continued to bounce back from coronavirus restrictions.

Fallers yesterday included Parsley Box Group, down 4.9% to 44.2p, Hotel Chocolat Group, down 4.2% to 504p, Pets at Home, down 3.9% to 473p, and McColl’s Retail Group, down 2.9% to 19p.