By Paul Sandle
LONDON (Reuters) -British retailer Marks & Spencer on Thursday reported a better-than-expected 8.1% rise in sales over the Christmas trading period, driven by market-leading growth in food and a strong performance in womenswear.
The company said the strong performance – its 11th successive quarter of growth – underpinned its confidence about profits this year, but it sounded a note of caution on economic uncertainty and pressure from wage and business rates inflation.
“We enter 2024 with a spring in our step, but clear eyed on the near-term challenges,” Chief Executive Stuart Machin said.
Despite beating expectations, M&S did not upgrade its profit expectations.
Its shares, which have doubled over the past year, fell 4.5%.
Commenting on the share price reaction and his cautious outlook, Machin noted M&S’s strong trading had been anticipated after recent strong industry data.
“I think it’s right not to get too carried away,” he told reporters. “M&S has a history of over promising (and) under delivery.”
M&S said like-for-like food sales rose 9.9% in the 13 weeks to Dec. 30, ahead of the most optimistic analyst forecasts and a consensus of 6.6%, while clothing and home growth of 4.8% also soundly beat expectations of a 2.8% rise.
In food, M&S said it outperformed the rest of the grocery market, noting that volume sales were up 7%, while clothing and home also grew ahead of the market.
Machin said both Christmas food, which featured more than 350 new and upgraded products, and staples like salads sold strongly. It sold nearly 1 million turkeys, he said.
M&S traditionally punches above its weight over Christmas, as customers switch from other food retailers. Britain’s much bigger supermarket Tesco sold over 1 million fresh turkeys, turkey crowns and joints, it said on Thursday.
Industry data published this week had pointed to a strong Christmas food performance, with M&S’s total sales growth only topped by discounter Lidl GB.
Investors have growing conviction that Machin’s strategy to turn around the 140-year old group after years of false dawns is gathering momentum.
He said a decision not to discount clothing in unseasonably warm weather in November had paid off later in the season.
After two years of higher inflation in the wider retail market, M&S did not intend to increase clothing and home prices this year, he added.
The group is finally reaping the rewards of investments to improve the value and quality of its clothing and food, upgrade technology and e-commerce, and overhaul its store estate.
M&S said it was confident its results for the year to end-March would be consistent with market expectations.
Analysts expect adjusted pretax profit of 663 million pounds ($846 million), up from 482 million pounds in 2022/23.
($1 = 0.7836 pounds)
(Reporting by Paul Sandle; editing by Sarah Young and Elaine Hardcastle)