Wednesday, December 1, 2021

Marks & Spencer Profits Rise, Retailer Warns of Cost Rise

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Marks & Spencer stocks rose as much as 20 percent on Wednesday as the retailer defied supply chain chaos and posted rising profits.

M&S has raised its profit target for the second time in three months, but warns it is facing “significant” cost increases in the struggle with disruptions in global shipping, higher energy prices and labor shortages in the supply chain.

The high street chain is being hurt by a shortage of truck drivers, warehouse and factory workers, with problems expected to continue through 2022.

Pressure on grocery retailers to pay more for their products is growing as farmers’ costs continue to rise and profit margins, which are already tight, are wiped out.

M&S increased pay to attract more employees, but said it was well positioned to meet the challenges. The company also tried to reassure customers that availability would stay high over Christmas.

Supermarket shelves looked increasingly bare in the second half of this year, but M & S’s latest financial results show that it outperformed some of its competitors.

In the grocery store, sales rose by 10.4 percent. Apparel and home sales decreased 1 percent but began to improve in the second quarter. Underlying pre-tax profit rose to £ 269.4 million in the six months ended October 2, up 52.8 percent from two years before the Covid-19 outbreak.

M&S has benefited from a rebound in consumer demand since reopening its clothing and home stores after the lockdown.

Steve Rowe, CEO of M&S, said performance was boosted by a long-term plan to modernize the company, which has struggled for years to adapt to changing shopping habits.

The “tough steps to drive long-term change are beginning to show in our performance,” he said.

“Given the history of M&S, we knew we were not going to overtax our progress,” he said.

While the company has been helped by the broader economic recovery, Mr. Rowe also pointed to “headwinds from the pandemic, supply chain and Brexit, some of which will continue into next year”.

He added, “However, thanks to the hard work of our colleagues, it is clear that underlying performance is improving.”

Julie Palmer, partner at bankruptcy firm Begbies Traynor, said: “From a joint venture with Ocado to improving its multi-channel approach to prioritizing its online offering, M&S has shifted and it’s paying off in its results.

“With the sleigh bells around the corner, however, all eyes will be on how things will go in the upcoming tough Christmas season. The retailer has kept supply chain problems at bay so far but said it expects shortages in its apparel and homeware range to affect and drag on through 2022. “

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