Marks and Spencer to open stores in Ayrshire and Dundee

It last paid a dividend in 2019, before the pandemic and resulting lockdowns left retailers with large store portfolios facing huge challenges.

Michael Hewson at CMC Capital Markets said the growth reflected the benefits of the turnaround plan launched by former chief executive Steve Rowe and continued by current boss Stuart Machin.

This has seen M&S investing in expanding its successful food business while revamping the product range of the clothing and home business, which struggled in the face of changes in the market.

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Founded in 1894, M&S has rationalised its store portfolio in recent years, in a process that has resulted in closures in Scotland.

However, a spokesperson at M&S noted the company will open a new food hall in Linlithgow in January and one in Largs in spring. It will also open a full-line outlet in Dundee selling both food and clothing in spring.

The spokesperson said M&S had made a significant investment in its Scottish operations, which in turn had played a significant part in the results released yesterday.

The growth in the first half was driven by the food business, which increased sales by 15%.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown, noted this business may have been protected from the impact of the surge in inflation in recent months, which has prompted some consumers to curb spending.

“At a more premium end of the market, M&S' core customers aren't as sensitive to price,” he said.

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The growth rate for home and clothing sales was lower at 6%. However, that represented a success for M&S, which Mr Chiekrie noted had struggled in those markets in recent years. “It is particularly admirable given the pressure on sales of discretionary items amid the cost-of-living crisis,” he noted.

Wet weather in July made life difficult for clothing retailers.

M&S said consumer demand had remained surprisingly resilient. The outlook for the key Christmas sales period appears to be good judging by the response of shoppers to the ranges developed by the company.

Chief executive Stuart Machin said growth in sales had been accompanied by successful cost reduction efforts. He reckons the programme is on track “with over £100m savings delivered in the half and investment in supply chain modernisation driving efficiencies, translating volume growth to improved margin and profitability”.

However, the company warned that the outlook for next year was uncertain given concerns about the impact of repeated increases in interest rates on consumer spending and geopolitical developments.

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The company said it had lots still to do, including improving the performance of its online operation and continued rationalisation of its store estate.

“For many years, M&S has been constrained by its historic failure to modernise a legacy store base. As a result, even today, we depend on ageing stores that are costly to operate and maintain and, in some cases, no longer on pitch,” said the company. 

But Clive Black and Darren Shirley at house broker Shore Capital said the results announcement confirmed that M&S had enjoyed “a quite staggeringly successful” first half to the financial year.

The company grew sales by 11%, to £6.2 billion.

Directors felt confident enough about the firm’s prospects to recommend the payment of a 1p per share interim dividend.

Shares in M&S closed up 18.9p at 244.1p. That left the company with a stock market capitalisation of £4.8bn.

The shares fell from 256.9p in January last year to 93.2p nine months later.

The company lost its place in the FTSE 100 index in 2019 amid growing competition in the retail market but regained its elite ranking in August.