Source: Marks & Spencer

Marks & Spencer shares surged to a near four-year highs as its turnaround received a further boost this week, with upgraded earnings expectations following a strong start to the year.

In an unscheduled trading update on Tuesday, the retailer said the first 19 weeks of its financial year had seen continued market share growth across both its clothing & home and food businesses.

Like-for-like food sales grew over 11% in the period, driven by further investment in quality and trusted value, and sharpening prices on over 80 ‘Remarksable Value’ lines.

Meanwhile, like-for-like clothing & home sales grew over 6%, with strong growth in stores and more subdued growth in online.

Overall, group operating margin has continued to be “robust”, driven by strong store performance and enhanced by its store rotation and renewal programme.

M&S cautioned that “considerable uncertainties” about the economic outlook remain, and there is a risk the consumer market will tighten as the year progresses.

Nevertheless, it now expects the outcome for the year to show profit growth on 2022-23, and the interim results to show a “significant improvement against previous expectations”.

Broker Peel Hunt increased its target price for the stock from 220p to 300p in response to the announcement. Noting that M&S warned the market not to extrapolate better trends to the second half, the broker commented: “There is a lot of uncertainty, but we would say that even after these hefty upgrades the risk is firmly to the upside, and everything is underpinned by the cost savings anyway.”

AJ Bell investment director Russ Mould commented: “The company has been steadily taking market share, [and] in the background Marks has made meaningful progress on operating costs which could provide an ongoing tailwind to margins for some time to come. Current CEO Stuart Machin and his predecessor Steve Rowe deserve credit for succeeding where others failed.”

Shore Capital Clive Black added: “It is taking a long-time for M&S to overcome understandable investment community doubt and scepticism… Whilst so, we do sense a capability, competence, and confidence now within the business, something we have been signalling as building for some time, which suggests more resilience, more robustness, and perhaps that scope for the sequential earnings growth.”

M&S shares gained 8.3% on Tuesday to close at 221.6p, and had gained another 10p on Wednesday to close at its highest level since January 2022 – only just short of their highest level since May 2019.