M&S says strategy 'beginning to deliver' as dividend set to resume

British clothing and food retailer Marks & Spencer said its turnaround strategy was showing signs of delivery, enabling it to restore its dividend and forecast "modest" revenue growth this year.

British clothing and food retailer Marks & Spencer said its turnaround strategy was showing signs of delivery, enabling it to restore its dividend and forecast "modest" revenue growth this year. After decades of failed turnaround attempts, M&S, under CEO Stuart Machin, is seeking to build a more resilient business with a renewed focus on the quality and value of its clothing and food, heavy investment in technology and e-commerce, and a radical overhaul of its store estate.

The 139-year old company, one of the biggest names in British business, on Wednesday reported a better-than-expected 7.8% fall in 2022/23 profit and said it had made a good start to its new financial year, with both the food and clothing and home divisions growing sales. "While the economic outlook for consumer spending is uncertain, cost inflation remains high, and market conditions are expected to become more challenging, the strategy is beginning to deliver improved performance and there remains much within the group's control," M&S said.

Shares in M&S have increased 33% so far this year but having closed at 164 pence on Tuesday, they remain well off the 257 pence they were changing hands for in January 2022. They rose 7% in early trading on Wednesday.

The group said cost headwinds in 2023/24 included over 50 million pounds ($63 million) of additional energy costs and more than 100 million pounds of extra staff costs. These will be offset by targeted cost savings of 150 million pounds. "Despite facing significant headwinds, we are encouraged by the strong foundations established last year," it said.

M&S has not paid a dividend since its 2019/20 year as part of a move to protect its balance sheet during the pandemic. It said it plans to restore a modest payment, starting with an interim dividend at the results in November.

For the year to April 1, M&S made a profit before tax and adjusting items of 482 million pounds - ahead of analysts' average forecast of 436 million pounds but down from the 523 million pounds made in 2021/22. Profit fell in 2022/23 despite an 9.6% rise in revenue to 11.9 billion pounds, due to higher energy and labour costs and unhelpful currency moves.

It was also dented by M&S's exit from Russia, the lack of the prior year's government support on business rates and a share of losses from its online grocery joint venture with Ocado . ($1 = 0.7923 pounds)