Shore Capital analysts Clive Black and Darren Shirley said the division was “performing well, gaining market share and is set to expand a little faster …”
The food business reported like-for-like sales up by 2.5% compared with the same period of last year.
Total sales were 3.6% up at £4.9bn, while general merchandise like-for-like sales fell by 1.5%. UK trading profit was £270M, with group trading profit at £321M and UK retail trading profit at £240M.
Shore Capital estimated current pre-tax profit at £212M, with earnings before interest, tax, depreciation and amortisation in the first half at £541M.
Growth in the food business
Further growth in the food business was likely due to an increase in the number of Simply Food outlets, with more than 150 stores planned over three years in the UK, said Black and Shirley. The retailer would also benefit from a greater presence in western Europe, through outlets such as Relay in Paris and a wider product range.
“We warmly welcome M&S seeking to offer its full food range in more stores (which brings us onto the online opportunity),” they said. “Food availability remains a priority, where management is on-track to deliver 5% improvement, with greater depth of coverage.”
The retailer’s e-commerce business has its own platform from spring 2014, with fulfilment from the Castle Donnington centre, commissioned early in 2013. In fact, multi-channel sales increased by 28.5% in the half, which outperformed the market by about 12%. “Mr Bolland [M&S chief executive] spoke on the analysts’ [telephone interview] call of a sea-change in culture at the business from the perspectives of engaging and utilising social media,” said Black and Shirley.
But ladies wear clothing remained challenging for the retailer. “We remain concerned that M&S struggles to break-out in the domestic ladieswear market. What this says to us is that despite a demonstrably better and well received autumn winter season, the challenges that the M&S brand faces to convince many more shoppers to spend more in its stores remains deep-rooted.”
‘M&S struggles to break-out’
Shore Capital repeated its ‘buy’ advice on M&S shares.
City analyst N1 Singer said: “With weather hindrances hopefully behind us, M&S should produce better results in the second half – but this will be needed to make the growth being forecast. We remain buyers on the back of the transformation of the offer and improving in-store proposition.”
The analyst also repeated its ‘buy’ advice on the retailer’s stock.
Meanwhile, Bolland remained cautious about the short-term prospects for the business. “While consumer confidence appears to be improving, there is little evidence as yet of this translating to increased spending in the retail sector,” said Bolland.
“Given continued pressure on disposable incomes, we remain cautious about the outlook for the remainder of the year. However, we are well set up for the key Christmas trading period with more innovation and choice than ever before. Our overall expectations for the full year remain unchanged.”