‘As the M&S-backed Lionesses march on, the retailer is in contention for the customer cup’

Marks & Spencer hit the back of the net in both food and fashion – neither of which are open goals in tough retail market conditions – prompting an upgrade to first-half profit expectations and an anticipated increase in full-year earnings.

It was good news, in contrast to headlines highlighting the collapse into administration of Wilko, and sent Marks & Spencer’s share surging 7% immediately. In the year to date, its stock has climbed more than 80% and M&S is now a contender to re-enter the FTSE 100 when it is recalculated next month, four years after the retailer lost that status.

The performance is testament to what looks like a sustainable turnaround, begun by chair Archie Norman and former chief executive Steve Rowe, and accelerated by current chief executive Stuart Machin, who took the group reins a year ago after turbocharging the food division.

Sales rises across both main categories were accompanied by gains in market share – surely a key metric in present trading conditions – and less clothing stock than anticipated ended up on Sale, which helped deliver “robust” margin. Renewed focus on traditional M&S strengths, such as a reputation for quality and value, is paying off.

This week M&S also opened a new regional flagship in Liverpool One. The store-rotation programme, to create “bigger, better” branches is key to the retailer’s strategy and the new shops look more attractive and engage customers better than tired older counterparts.

M&S’ bricks-and-mortar network, sometimes seen in the past seen as an Achilles heel, are now a competitive advantage as shops continue to rebound post-pandemic and offer in-demand services such as click and collect. 

Such changes have been complemented by a cultural shift at M&S, begun a few years ago after Norman’s arrival. High standards are expected, rewarded with good treatment including pay rises that have helped staff through the cost-of-living crisis and by progressive approaches such as flexible working options.

M&S was one of the retailers that wrote the book on good employment practice and now, when stores play such a central role and there is stiff competition to recruit, it could reap further benefits from an engaged and happy workforce.

“M&S was one of the retailers that wrote the book on good employment practice and now, when stores play such a central role and there is stiff competition to recruit, it could reap further benefits from an engaged and happy workforce”

Despite the profit upgrade, M&S remained cautious about how things will play out in the months to come as retailers count down to Christmas. “There remain considerable uncertainties about the economic outlook, and there is a risk that the consumer market will tighten as the year progresses,” it observed.

Broker Peel Hunt noted: “Management is eager that analysts do not change their [second half] assumptions.” Nevertheless, they did. In Peel Hunt’s case it lifted its pre-tax profit forecast from £495m to £560m this year and from £560m to £625m next. M&S house broker Shore Capital upped its forecast for this year by 9% to £550m and said it “would expect consensus to follow”.

M&S may be taking a leaf out of Next chief executive Lord Wolfson’s expectations management book, underpromising and overdelivering, but it is right not to take anything for granted.

After so long in turnaround, signs of a return to form cannot be allowed to breed any of the complacency that undermined M&S after it started feeling entitled to success. Machin likes to foster a mindset of “positive dissatisfaction”, recognising good work but also the fact that perfection is never achieved and there is always room for improvement. He’s right to do so.

Good luck to the England women’s team on Sunday when they play Spain in the World Cup final. Victory, fantastic in its own right, would no doubt shift a few more pieces from M&S’ FA Collection, worn by the team as part of the partnership with the retailer, the squad’s official tailor.

For M&S, as the golden quarter nears, its improving trajectory makes it a strong contender in the only tournament that matters in retail – the customer cup.