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M&S sees food revenue rise by 4.4% driven by store openings

Marks and Spencer Group has posted half year results for 26 weeks to 30 September 2017 showing that Food revenue grew by 4.4%, driven by the opening of 24 new Simply Food stores, however like-for-like revenue was down 0.1%.

In a challenging market environment M&S introduced additional choice by extending the range in selected categories and ran more promotions. The firm launched over 750 new products in the period and sales of its Spirit of Summer products grew by c.20%. Market share increased by 10 bps to 4.2% according to data from Kantar Worldpanel (12 w/e 8 October 2017).

The decline in gross margin of 130bps year-on-year to 31.3% was more than expected. M&S absorbed significant input cost inflation while limiting price increases for customers. These costs were not fully offset by gains from our on-going value optimisation program, and process improvements to reduce waste.

New stores continued to exceed sales expectations and the group has significantly reduced the average lease commitment on new store approvals in line with the more rigorous capital framework announced last year.

The company said the headwinds facing its Food business have intensified as competitors have encroached on some of its space with the rapid growth of convenience.

Online home delivery is growing share. Hard pressed consumers are more aware of value and are careful about premium choices. Therefore, although the firm's investment returns remain high, it is slowing the Simply Food opening programme as it repositions the food offer for future growth. Only the highest returning sites will qualify for addition to its store portfolio.

M&S has already sharpened prices in core categories and will be taking further steps to bring out value in its ranges. It will increase the pace of relevant innovation, step change its availability and ranging, and continue to develop the Foodhall proposition.

Steve Rowe, Chief Executive said, “We have made good progress in remedying the immediate and burning issues at M&S I outlined last year.

“The business still has many structural issues to tackle as we embark on the next five years of our transformation, in the context of a very challenging retail and consumer environment. Today we are accelerating our plans to build a business with sustainable, profitable growth, making M&S special again.”

Marks and Spencer also announced that Helen Weir, Chief Finance Officer, has informed the Board of her desire to pursue a plural career. Helen will continue as CFO until a suitable successor has been found. M&S confirms that it has started a search to find a replacement.