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Highlights:
- For the 26 weeks to 1 October, it posted a pre-tax profit of £205.5 million.
- When compared to the same period last year, this is a 23.7% fall in pre-tax profits.
Uncertainties amid the cost-of-living crisis have hit several businesses. Especially those in the retail sector are bearing the brunt as people cut down on spending due to the rising prices. Many have expressed concerns that the upcoming festive season may not be as good as usual for retailers, with surveys also highlighting how people plan to scale down on shopping this year. Citing similar concerns, Marks and Spencer (LON: MKS) have warned of a more challenging future.
The FTSE 250 constituent posted its half-yearly results on Wednesday. For the 26 weeks to 1 October, it posted a pre-tax profit of £205.5 million as food prices saw double-digit inflation, eating into the margins. When compared to the same period last year, this is a 23.7% fall in pre-tax profits.
Image source: © 2022 Kalkine Media®
The profits also took a hit from the company's exit from Russia earlier this year and the higher property taxes after the business rates relief ended.
The fall in profits came despite the rise in sales for the period, which reached £5,563.6 million against the £5,112.9 million in October 2021.
The company's food sales during the period jumped 5.6%, but the underlying earnings were down to £71.8 million from £124 million last year. This is because the company decided not to pass on food price rise to the customers fully. Meanwhile, clothing sales increased by 14%.
Ocado Retail, in which M&S holds a 50% stake, reported a loss of £0.7 million, against a profit of £28.1 million last year. The company cited reverting demand and capacity growth as the reason behind the downfall.
Outlook
M&S has warned of more challenges ahead because of the higher costs and forecasts that households are set to see more inflationary pressures. The company's performance in the first four weeks of the second half of this year was in line with the forecasts, and it expects its adjusted pre-tax profit for FY23 to be in line with forecasts set out in its FY22 results.
Share price performance
The market reaction to the latest figures from M&S was negative, and its stock tumbled over 5% the day after opening at GBX 117.00. As of 9:11 am GMT+1 on 9 November, the stock was trading at GBX 110.65, down 5.47%. Currently, the company holds a market cap of £2,299.32 million, and its turnover (on book) stands at £2,567,556.93. With an EPS of 0.16, the stock has given a negative return of -41.61% in the past 12 months. On a year-to-date basis, the stock price has tumbled by more than half.
