Marks and Spencer to pay first post-pandemic dividend

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Marks and Spencer is to pay a dividend for the first time since before the pandemic as bumper food sales powered the UK retailer to a better than expected first-half profit.

The company said on Wednesday that it made pre-tax profits of £326mn in the six months to September 30, up 56.2 per cent from £208mn in the same period last year. Food sales climbed almost 15 per cent to £3.8bn.

M&S declared a 1p per share interim dividend, its first payout since before the Covid-19 pandemic. The group’s shares jumped 9 per cent to 245.5p in early London trading following the results.

The revival in the retailer’s fortunes catapulted it back into the FTSE 100 index of blue-chip companies this year. The group’s shares have climbed more than 90 per cent since January, making it the second-best performer in the index after Rolls-Royce.

M&S cited “favourable market conditions” for its success, aided by “surprisingly resilient consumer demand and the effect of competitor exits from the market”. Rival department store Debenhams failed at the end of 2020, shortly after Philip Green’s Arcadia fashion empire fell into administration.

First-half profits comfortably exceeded analysts’ forecasts. Clive Black, at Shore Capital, said in a note that the first half had been “quite staggeringly successful” and that he was upgrading his profit forecasts for the year.

However, M&S sounded a note of caution for the remainder of the year and next. “As we enter 2024, we are not relying on the favourable recent market conditions persisting,” it said. “The outlook remains uncertain with the probable impact on the consumer of the highest interest rates in 20 years, deflation, geopolitical events, and erratic weather.”

The company added: “Against more challenging comparatives, we expect profit before tax and adjusting items to be weighted towards the first half.”

Food retail sales continued to support the share price as M&S gained volume and market share in the sector.

M&S announced that it was at the “early stages” of a “reset” plan for its partnership with online retailer Ocado, which registered a first-half operating loss of £23.4mn. The company said it would continue to increase the number of M&S food products available to order via Ocado, “to combine the strength of M&S Food with Ocado’s unique and proprietary technology”.

Food margins recovered to 4.3 per cent compared with 2.2 per cent last year, but remain below previous figures. Clothing and home sales experienced more conservative sales growth of 5.7 per cent, with the margin for the division rising to 12.1 per cent, from 9.8 per cent last year.