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Author: Alan LittleDate: 2021-08-23

Marks & Spencer (MKS) +14% after “very encouraging” earnings update

Marks & Spencer (MKS) surged 14% in London on Friday after the British high-street retailer said that its trading performance was “encouraging” and forecast for up to £350m in profit for the full year.

While sales at physical stores were still down 20% compared to pre-pandemic numbers, online sales soared 62% during the latest period as consumers snapped up a range of goods.

Marks & Spencer noted that revenue from food jumped 10.8%, while its Clothing & Home division grew 92% year-over-year and was only 2.6% lower compared to 2019.

After a more conservative estimate earlier in the year, the retailer is now confident of hitting the top end of guidance of £350m in earnings, though analysts believe that it could be even higher.

Shore Capital said that the latest update was “very encouraging news”, while UBS believes that it bodes well for the rest of 2021.

UBS noted: “While there may well be an element of pent up demand and there are some uncertainties ahead in terms of normalisation of that, this upgrade reflects a good start to the year.”

Meanwhile, Peel Hunt analysts revealed that Marks & Spencer is already on track to surpass internal expectations and that cost-cutting measures have been successful, while promotions for clothing are working.

The London-based retailer is optimistic about its prospects but sounded caution on supply chain “disruption” and the impact that this could have on its margin.

Investors were receptive to the news on Friday though as Marks & Spencer shares traded higher from start to finish on the LSE.

After making early gains, MKS eventually closed up 14.09% at $162.80, which is not far off its 52-week high of $173.88.

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