M&S is a ‘buy’ for Share Centre, as it posts first annual profit rise for four years

20th May 2015


As Marks and Spencer posts its first rise in annual profits for four years, Ian Forrest, investment research analyst at The Share Centre, explains what these mean for investors…

This morning, Marks and Spencer reported its full year results, highlighting progress ahead of market expectations. Underlying pre-tax profits rose 6.1% to £661.2m, compared to forecasts of £648m.

Chief executive Marc Bolland commented that the group is transforming “into a stronger, more agile business – putting the right infrastructure, capabilities and talent in place to drive our strategic priorities”, which may reassure investors. The raised profit margin and dividend have been assisted by the increased profitability of its general merchandise and food businesses. Investors should acknowledge that 62 new food stores have been opened and there are plans for further developments. The general merchandise business, which sells clothing and homewares, also saw its profit margin increase but the company said its sales performance for the year did not meet expectations.  The international business is struggling with the combination of a weak euro and a difficult economic background in some of its markets, but the M&S.com website is expected to build on the growth it saw in the fourth quarter.

Overall sales for the group rose 0.4% to £10.3bn while the final dividend was lifted 7%, making for a total pay-out of 18p for shareholders. These results are generally good for investors, and as a result we continue to recommend Marks and Spencer as a ‘buy’. This is due to the strength of the growing food business, the significant potential to increase profitability in general merchandise, rising disposable incomes and the healthy dividend.

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