Marks & Spencer Group plc (MKS) Ordinary 25p
HL comment (5 November 2014)
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- Marks & Spencer reported a 2.3% rise in underlying pre-tax profit to £268 million in the period to 27 September.
- Group sales rose 0.5% to £4.9 billion.
- Gross margin has shown a strong improvement, in part due to the tight control of costs which M&S is currently undertaking.
- Like-for-like General Merchandise sales were down by 2.9%.
- M&S.com sales fell by 6.3% during the period as updates continue to be made to the platform.
- International sales dropped 3.4% on a reported currency basis, in part due to currency headwinds and unseasonal conditions across Europe.
- An improvement in cash generation during the first half year resulted in an interim dividend of 6.4 pence being declared, up from 6.2 pence paid a year earlier.
- UK non-food or General Merchandise like-for-like sales fell by 2.9%. This is now the 13th consecutive quarter during which GM or clothing and homeware has declined. M&S said the "unseasonal weather resulting in high levels of promotional activity across the market" had hit performance.
- Sales at M&S.com, which was relaunched earlier this year, slid by 6.3%, however the retailer said its online business is "on track for growth ahead of peak trading period". Competition in the online arena remains intense.
- The group's push overseas has yet to convince, given the difficulties which other retailers such as Tesco have now run into. Ongoing challenges in Ireland remain present, while its franchised business has been impacted by currency and political issues in its Middle East region, and lower shipment timing issues.
- Unlike some rivals, M&S does not have a material online food proposition.
- M&S Chief Executive Marc Bolland said: "M&S delivered sales growth and increased profit in the first half despite a tough market, particularly in September. We are pleased with the progress we have made against our key priorities for the year: general merchandise gross margin, improving womenswear, driving food growth and cash generation."
- Growth (1.3%) in the important Womenswear category was reported on an "improving trend".
- UK gross margins improved, in part due to the tight control of costs which M&S is currently undertaking and a strong improvement in General Merchandise.
- M&S said it will speed up Simply Food store openings from 150 to 200 over three years.
- Group capital expenditure spend down by £44.1 million year-on-year following the completion of a number of large infrastructure projects.
- The dividend payment remains attractive in the current low interest rate environment - a yield of 4.2% as of 5 November 2014 (not guaranteed).
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